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ENGLER, George Nichols, 1944-

THE TYPEWRITER INDUSTRY: THE IMPACT OF A
SIGNIFICANT TECHNOLOGICAL INNOVATION.

University of California, Los Angeles, Ph.D., 1969
Business Administration

University Microfilms, Inc., Ann Arbor, Michigan

(o) Copyright by
George Nichols Englcr
1970

THIS DISSERTATIOH HAS BEEN MICROFILMED EXACTLY AS RECEIVED

UNIVERSITY OF CALIFORNIA
Los Angeles

The Typewriter Industry: The
Impact of a Significant Technological Innovation

A dissertation submitted in partial satisfaction of
•the requirements for the degree Doctor of Philosophy
in Business Administration

George Nichols Engler

Committee In charge:

Professor J. Fred Weston, Chairman
Professor Raymond J, Jessen
Dean Laurence W. Erickson
Professor Moshe F. Rubinstein
Professor James M. Warren

1969

The dissertation of George Nichols Engler is approved, and it is

University of California, Los Angeles

1969

TABLE OF CONTENTS

Page

LIST OF TABLES AND FIGURES vi

ACKNOWLEDGEMENTS ix

VITA x

ABSTRACT OF THE DISSERTATION xi

CHAPTER I INTRODUCTION 1

A. Purpose of the Study - 1

B. Organization of the Study 4

CHAPTER II THE EARLY HISTORY OF THE TYPEWRITER

INDUSTRY 10

, A. Early Years 11

B. The Remington Company: Manufacturing

In Volume 18

C. New Entries 26

D. Proliferation of Entrants 28

E. Competitive Processes in Operation 30

CHAPTER III ECONOMIC FRAMEWORK OF THE TYPEWRITER

INDUSTRY 35

A. Product Types and Variations 35

B. Cost and Production Characteristics 40

C. Market Structure Analysis 46

D. New Entry Characteristics 57

E. Profit Performance Overtime 75

CHAPTER IV MARKETING, DISTRIBUTION AND SERVICE
ORGANIZATION IN THE TYPEWRITER
INDUSTRY 83

A. Reinforcement of Marketing and Service

Organization 85

B. Marketing Problems Facing a Foreign

Manufacturer 90

C. Changes in the Typewriter Industry 95

CHAPTER V THE IMPACT OF FOREICN COMPETITION

ON THE U.S. TYPEWRITER INDUSTRY 100

111

A. Brief Resume of Tariff History 100

B. Trends in World Trade in Typewriters 102

C. Manufacturing Operations Abroad by

U.S. Typewriter Companies 108

D. Cost Comparisons 120

E. Market Share Considerations 121

CHAPTER VI THE IMPACT OF THE IBM TYPEWRITER 127

A. Early History of the Electric 127

B. Entry of IBM 129

C. The War Years 1941-1946 “ 130

D. Advantages of the Electric over the

Manual Typewriter 133

E. Specific Advantages to IBM 144

F. The Development of the Electric

Portable by SCM 150

•

CHAPTER VII HISTORY AND DIVERSIFICATION POLICIES

OF THE TYPEWRITER COMPANIES 156

A. History of Firm Disappearance in the

Typewriter Industry 156

B. Merger Patterns in the Typewriter

Industry 159

C. Financial Terms of the Mergers of the

Four Major Typewriter Companies 164

D. Financial History of the Four Major

Typewriter Companies 176

E. Profitability Performance of the Major

Typewriter Companies 186

F. Diversification Efforts by Typewriter

Companies 189

G. Evaluation of Diversification Efforts

of the Typewriter Companies 192

Appendix VII-1 201

Appendix VII-2 203

CHAPTER VIII THE EDUCATIONAL MARKET FOR TYPEWRITERS 215

A. Dimensions of the Educational Market 215

B. Marketing Efforts of the Major Typewriter

Companies 221

C. Market Characteristics of the L.A.

School System 225

227

D. Extent of Electrification in the L.A.

School System

CHAPTER IX FUTURE TRENDS IN THE TYPEWRITER

INDUSTRY 234

A. Public Policy Guidelines as Related to

a Competitive Atmosphere 234

B. Long Term Prospects for the Typewriter

Industry 243

CHAPTER X SUMMARY AND CONCLUSIONS - 248

BIBLIOGRAPHY 266

APPENDIX 275

TABLES AND FIGURES

TABLE

Page

II- l Highlights in the Chronology of

the Writing Machine 14

III- l Market Share Relations, Typewriters 50

III-2 Market Share Relations Over Time 52

III-3 Market Shares by Segment of the

Typewriter Industry, 1967 54

III-4 Over-all Market Share in Typewriter

Industry, 1967 56

III-5 Location and Employment at U.S.

Typewriter Manufacturing Plants 63

III-6 Profit Rate on Equity (After Income

Taxes) for the Four Traditional
Firms in the Typewriter Industry 77

V-l U.S. Position in World Production

of Typewriters, 1965-1967 107

V-2 Pattern of Location of Manufacture

of Typewriters Abroad 114

V-3 Ratings of Portable Typewriters,

1960 116

V- 4 Ratings of Portable Typewriters,

1966 118

VI- 1 Calculations for Replacement

Decision at 10X Efficiency 140

VI-2 Calculations for Internal Rate

of Return 143

VI- 3 Calculations for Replacement

Decision at 5X Efficiency 145

VII- 1 Summary of Appendix 1 and Appendix 2 158

▼i

TABLE VII-2

Merger History CHitline of the

Five Surviving U.S. Typewriter

Companies 160

TABLE VII-3

TABLE VI1-4

TABLE VII-5

TABLE VII-6

TABLE VII-7

TABLE VII-8

TABLE VII-9
TABLE VIII-1

TABLE VIII-2

TABLE VIII-3

TABLE VIII-4

Financial Terms of Various SCM
Mergers

Financial Terms of Various
Olivetti-Underwood Mergers

Financial Terms of various
Royal Mergers

Financial Terms of Various Sperry-
Rand Mergers

Terms of Purchase for Past 1930
Mergers

Profit Rate on Equity (After Income
Taxes) for the Four Dominant Firms
in the Typewriter Industry

Capsule History of SCM Corporation

Number of School Districts and
Average Enrollment per District,
1965-1966

Public and Private Schools Number
by Level, 1930-1966

Distribution of Local School Systems
and Enrollments, by Enrollment Size
of System for the U.S. Fall, 1967

School Enrollment and Expenditure
by Type of School, 1930-1960

165

168

170

174

175

187

193

217

218

219

220

TABLE VIII-5 Fall Enrollment, by Organization

Level of School and Control, U.S.,

1955-1975 222

TABLE VIII-6 Enrollment in Los Angeles School

System, Spring 1968 226

vii

228

TABLE VIII-7 Number of Typewriters in L.A.

City School System

FIGURE III-l Pattern of Typewriter Sales in

the United States, 1948-1967 37

FIGURE III-2 Cost and Production Characteristics

of Typewriters, 1968-1965 42

FIGURE III-3 Share of Production Data for

Industries in SIC 357 Category 45

FIGURE III-4 Graphic Analysis of Economics of

Scale 59

FIGURE V-l United States Proportion of

Typewriter Imports to Exports,

* 1948-1967 103

FIGURE VII-1 Sales Patterns of the Four

Traditional Typewriter Companies 178

FIGURE VII-2 Total Asset Patterns of the Four

Traditional Typewriter Companies 180

FIGURE VII-3 Net Income Patterns of the Four

Traditional Typewriter Companies 182

FIGURE VII-4 Net Worth Patterns of the Four

Traditional Typewriter Companies 183

FIGURE VII-5 Rate of Return Patterns of the

Four Traditional Typewriter
Companies 184

viii

ACKNOWLEDGEMENTS

I wish to express my appreciation to J. Fred Weston,
Professor of Finance and Business Economics and Chairman
of my Dissertation Committee for providing valuable guidance.

I also appreciate the suggestions and criticism made by
the members of the Committee: Frank Norton,- Associate
Professor of Business Economics; Raymond Jessen, Professor
of Statistics; Laurence Erickson, Dean of the School of
Education; Moshe Rubinstein, Professor of Engineering; and
James Warren, Assistant Professor of Finance.

Special appreciation is expressed to David Cole of
Litton Industries; Stella Willins and Wayne K. Boulton of
the Royal Typewriter Division of Litton Industries for their
valuable assistance in providing vital information concerning
the typewriter industry.

My appreciation is also extended to Kent Alves for his
assistance in the collection of data; and to Virginia Elwood,
Darlene Johnson, Nelli Williams, and Shara Puck for their
assistance in preparation of the manuscript.

Finally, special thanks are due my wife, Suzanne, for
continued words of encouragement during the completion of
this dissertation.

VITA

September 27, 19IA
June, 1965

June, 1966

1965-1969

* 1967-1969

Jfajor Field:

Studies In Finance

Studies In Economics

Studies In Statistics
Data Processing

Bora, Los Angeles, California

B.S., Finance, University of
Southern California

M.B.A., University of California
Los Angeles

Research Assistant in Finance,
Graduate School of Business Admini¬
stration, University of California
Los Angeles

Assistant Professor of Finance,
School of Business Administration,
California State College at Long

Beach

Lecturer in Statistics, University
of California, Los Angeles

Field of Study

Business Administration

Professors J. Fred Weston, David
Eiteman, Eugene F. Brigham, Keith V.
Smith, and James Holtz

Professors Armen Alchien, Jack
Hirshleifer, Michael Intrilj igator,
Frank E. Horton, and J. Fred Weston

and ft-ofessors Raymond Jessen, Frank

Puffer, Rosser T. fielson, and
George Diehr

ABSTRACT OF THE DISSERTATION'

The Typewriter Industry: The Impact of
a Significant Technological Innovation

George Hichols Engler

Doctor of Philosophy in Business Administration
University of California, Los Angeles, 1 S 69
Professor J. Fred Veston, Chairman

The basic purpose of this study is three-fold: ( 1 ) to
update the picture of the typewriter industry to include
both pre-electric and electric phases of development, (2)
to test the relationship between seller concentration and
excess profit making in the electric typewriter field, and
( 3 ) to explore the problem of seller concentration and the
possible existence of barriers to entry in the electric
typewriter industry.

The typewriter industry has progressed through three
distinct market structure phases. In the initial phase the
industry was characterized by a high degree of competition
among over one hundred firms. The second phase began
during the V) 20 's, when four firms finally came to dominate
tho typewriter market with 80 percent of the total sales
value of the industry. From this oligopoly structure the

industry entered its third phase—that of a partial

■onopoly—with I3S as the dominant firm in the field.

In the past, industry studies have shown a

relationship between hiqh concentration in an industry, the
extent of various barriers to entry and the degree of
profits which cay result. As an integral part of this
research paper, these various hypotheses were tested for
the typewriter industry—both for the pre-electric and the
electric era. The analysis revealed that althouqh there is
a hiqh deqree of concentration among the U.S. domestic
"producers this did not lead to a condition of excess
profits. The analysis did reveal, however, that with the
hiqh deqree of seller concentration in the typewriter
industry the barriers to entry were of considerable
magnitude.

In the analysis, the dominance of IBr. is clearly
established. At present, IBM has developed a

technologically superior electric typewriter. Coupled with
this is the fact that IKK also has a superior marketing and
distribution system. With the continued shift in consumer
preference from the manual to the electric typewriter, it
seems unlikely that IBM's market position will diminish in
the near future.

The study qocs on to show that duo to the forces of
competition—both foreiqn and domestic—the traditional
typ< triter manufacturers have been absorbed into larqa

xii

diversified organizations.

The course of action open to the major domestic
typewriter manufactures seems clear. Either they develop
an electric typewriter that is technologically equal to
that of IBH and a sore effective marketing and distribution
system, or they will continue to experience a decreasing
share of the typewriter market.

The technological and marketing aspects of the
typewriter industry have played a vital role throughout the
pre-electric and electric eras. In order to successfully
'adapt to the demands of the forthcoming electronic era, the
typewriter firms of today must develop both technological
capability and strong marketing and distribution systems.

xlll

CHAPTER X

IHTBOEUCTIOK

Typewriters were first produced in the United States
in 1873. By the turn of the century, most of the
prevailing features of the manual typewriter had been
introduced. The visible front-strike design was developed
in the early 1890’s. Shortly thereafter, the initial steps
in the development of the portable typewriter were taken.

‘And by the early 1920’s the noiseless typewriter was on the
■arket.

The age of the nanual typewriter was characterized by
prcdominatly mechanical devices. This aqe—sometimes
referred to as the "pre-electric era"—continued through
the 1930’s. Product variations were widely imitated. As a
result, many new entries were made into the industry. With
the expiration of the basic product patents, product
differentiation and changes in design were limited to
special features which helped sell the uachine.lt wasn’t
until the end of World War II that the impact of tha
electric typewriter beqan to bo felt.

A. El*£i:2se of ite Study

The typewriter industry is vitally important to tha

United States and, indeed, the rest of the world as well.
Curinq the last several decades the typewriter has played a
key role in business, government, and the bone. Today's
world, with its overwhelming need for rapid communication,
would be at a serious disadvantage without the use of the
typewriter to reproduce the huge volune of personal,
business and governmental documents so necessary in our
everyday lives. This fact alone would make the typewriter
industry worthy of consideration.

However, upon examination of the literature in the
‘field, one finds that little has actually been published on
the typewriter industry. The only available analytical
study of the industry concentrates on the years prior to
World War IX.* In the post-war period the typewriter
industry experienced tremendous qrowth, brouqht about
larqely by the introduction of a significant technological
innovation—the electric typewriter. To date, there exists
no sinqle analytical study which encompasses both the
pre-electric and the electric phases of typewriter
development.

During the 1910’s and early 1920’s the market shares
of the typewriter manufacturers were fluid, but by the
*id-1920’s evidence indicates that a high level of
concentration had been achieved by four larqa
co»panies--Bemington, Royal, Smith-Corona and Underwool.*
The advent of the electric typewriter brought about

significant shifts in traditional market concentrations
which led, in tarn, to realignment of pre-existing
corporate structures. The result was the virtual
disappearance of traditional typewriter manufacturers as
independent entities.

Economic theory suggests that a high degree of seller
concentration within an industry is frequently accompanied
by collusive practices resulting in excessive profits to
those involved. This study will attempt to formulate and
test the hypothesis that the typewriter industry since the
‘■id-1920's has conformed to the conclusions suqqested by
economic theory regarding the relationship between
concentration and excess profits.

Economic theory further suqgests that when seller
concentration exists, it is also possible that barriers to
entry will be present. Economics of scale, product
differentiation, absolute cost advantages, and capital
requirements are four frequently cited barriers. Evidence
from the typewriter industry indicates that some of these
barriers were indeed of considerable importance during the
pro-electric era. 3 In the following pages an attempt will
be made to determine if any significant barriers to entry
exist in the electric era.

Thus, the basic purpose of this study is three-fold:

(1) to update the picture of the typewriter industry to
include both pro-electric and electric phases of

development, (2) to test the relationship between seller
concentration and excess profit nakinq in the electric
typewriter field, and (3) to explore the problem of seller
concentration and the possible existence of barriers to
entry in the electric typewriter industry.

B. Organiz ati on of the Study

A qeneral historical background of the typewriter
industry is presented in Chapter II. Starting in the early
‘1700's the history of the typewriter is developed through
the 1860's. At this tine the first practical typewriter
was developed. Fro* this point on, typewriters were
produced in larqe volume with a qreat number of new entries
into the industry. The chapter then examines the reasons
and the events that led to the formation of the aajor
typewriter manufacturers during the 1920's and 1930's.

while Chapter II looks at the typewriter industry
fro* an historical standpoint. Chapter III analyzes the
industry from an economic point of view. The market
structure features of the industry are examined to
determine what kind of structural changes occurred over
ti*e and to determine the level of concentration within the
industry. Features of market structure are then compared
to »arket performance to determine how industry profits
relate to the level of seller concentration. Associated

with the level of concentration is the possibility of
barriers to entry into the market. Four

barriers—econooics of scale, absolute cost barriers,
product differentiation and capital requirements—are
examined to see what relationships exist between barriers
to entry and the relative deqrea of concentration.

Chapter IV discusses the marketing and distribution
systems that the industry requires for an effective sales
program of typewriters. First the marketing, distribution
and service organizations of the domestic firms are
'examined in terms of the success the traditional typewriter
conpanics are havinq in competing with IBK. Next the
■arketinq problems of foreign manufacturers are examined.
The type of distribution system open to foreiqn
competitors, the dollar size of investment needed to
siqnificantly penetrate the U.S. market, and the maximum
market share that can be expected if the foreign producers
do not penetrate the O.S. market are further topics
discussed in this chapter.

Continuing this theme. Chapter V deals with the
impact of foreiqn competition on the U.S. typewriter
industry. It begins with a brief resume of the tarift
history of the industry at homo and abroad. Next the
trends of imports and exports of typewriters are exanined
to see how U.S. production and consumption of typewriters
relate to other countries’ production and consumption of

typewriters. The factors that influence D.S. companies to
prepuce typewriters abroad are discussed in terns of their
impact on the domestic market as well as their impact on
foreiqn markets. And finally, in light of the increasing
effects of foreign competition, the new shift in market
shares of foreiqn companies is considered to see what
effect these companies will have on the U.S. typewriter
industry in future years.

eany of the problems facing the traditional
typewriter aanufacturers, such as declining or shifting
‘market shares and increasing foreiqn competition, have
partially been the result of the significant part that
electric typewriters play in the typewriter industry today.
Chapter fl analyzes the impact of the electric typewriter,
specifically the impact of the IUK electric typewriter,
upon the entire typewriter market. First the begining of
the electric era is discussed in terms of how IBH became
involved in the concept of the electric typewriter while
other firms ignored it. Next the years of World War II are
discussed, for during this period IBH achieved its lead in
the development of the electric typewriter. As seen today,
the electric typewriter offers considerable advantages over
the manual typewriter. Each of these advantages is
discussed with respect to its influence on the overall
typewriter market.

The ability of firms to exist in this industry

depends to a large extent upon the profitability of those
firms. When they become unprofitable, plaqued with
production and marketinq problems, they in many cases
disappear or serqe with another fire. Whether such nerqers
combined two successful companies or one successful and one
sick company is the subject matter of Chapter VII. Each of
the major typewriter companies has had a history of nerqers
and diversification. First, the story of those firms that
disappeared is discussed. Then the merqer pattern of those
firns that still remain is examined in terns of the reasons
’for the nerqers and the financial terms of the mergers.
Data on the five larqe typewriter manufacturers were
collected to analyze the profitability trends within the
industry.

Bany of the diversification policies of the
typewriter companies have been due to the fact that certain
companies have partially dominated various seqments of the
typewriter market. One area in which no one typewriter
manufacturer has made any siqnificant penetration with the
electric typewriter is that of the educational field. Thus
Chapter VIII concerns itself with the various aspects of
tho market for electric typewriters in education. First
the overall dimensions of the educational field are
discussed in terms of the size of the national educational
market. Boxt, the educational marketinq efforts of tha
major typewriter manufacturers are discussed. Here one

observes vhat efforts the domestic typewriter producers are
makinq to sell their products to various school sytems.
Pron this point on, the focus of the chapter is narrowed to
an analysis of one specific school system—the Los Angeles
School System. The size of the system is discussed along
with the special requirements the systea has in determining
which typewriters it should buy. And finally, the L.A.
School System is analyzed with respect to the extent of
electrification that has occurred in the system and the
success which various typewriter manufacturers have had in
'penetration of this field and this school system.

After analyzinq the past and the present conditions
in the typewriter industry, the future prospects of the
industry are examined. Pirst, the immediate future is
discussed to determine uhat action could be taken to stem
the increasing dominance by IE.1. Then, the long tern
prospects of the industry are analyzed. After the electric
era ends and when the electronic era begins, what kind of
■achines will be used to replace the typewriter and what
will be the firm composition of the industry? Perhaps the
study of past and present trends in the typewriter industry
will give some indication of what the future may bring.

FOOTNOTES TO CHAPTER 1

1. Joe S. Bain, Ea rri ers to Sew C ompet ition
Bass: Harvard University Press, 1965) p. 89.

2. Ibid ., pp. 192-195.

3. Ibid ., p. 285.

(Cambridge,

CHAPTER II

THE EARLY HISTORY OP THE TYPEWRITER INDUSTRY

Throughout time, mankind has been interested in more
lasting and simplified forms of communication. This is
evidenced by rock paintinqs in France during the

pre-historic period, by the clay tablets of the
Babylonians, by the parchment paper of the Egyptians, by

the development of the printinq press and finally by the
‘advent of the typevriter.

The early development of the typevriter was quite
slow and faltering. In 171H, Queen Anne qranted a patent
to Henry Mill, an Enqlish enqineer, for "an artificial
nachine ... for the impressing ... of letters singly or
progressively ... whereby all vritinqs whatsoever may be
engrossed in paper ... so neat and exact as not to be
distinguished from print." 1 It is known that Henry Rill vas
the chief engineer of the Hew Hivcr Company which was one
of the corporations supplying water to London. In addition

it is known that he designed the water supply system for

the town of Northampton. No record is available of what
type of machine Mill invented, but the basic concept of the
typewriter is stated in the patent qranted.

A. Early Years

The first American patent for a writing machine was
qranted in 1829 by President Andrew Jaclcson to William
Austin Burt of Detroit. Burt's aachine used a typewheel as
a printer. The individual letters were arranqed on the
typewheel, each desired letter was rotated to the printing
point, where it was depressed. It is interesting to note
that Bart was not noted for the development of a typewriter
but rather for the invention of the solar conpass. His
‘only aodel of the typewriter was destroyed by fire at the
Washington Patent Office in 1836. It was restored by the
same office from a copy of the oriqinal patent and was
displayed at the Columbian Exposition in 1893. 2

The first practical typewriter was manufactured in
1873. But in the forty years intervening between the
patent to William Burt, a qreat variety of inventor's
approaches to the typewriter were radc. One such approach
was made in 1833 when a French patent was granted to Xavier
Prolean of Marseilles for his machine called the
"({typographic". It basically "consisted of an assembly of
type bars arranged in a circle, each type strikinq downward
upon a couron center." 3 Although it was a sound machine, it
was too slow for any practical utility and never got off
the ground.

Typewriters up to 1923 were divided into two classes

based upon their operational characteristics. One was the
typewbeel nachine based after Willian Burt's nachine -an!
the second class was the typebar nachine developed after
Projean's nachine.

The next najor contributor to the developnent of the
typewriter was made by Charles Thurber of Worcester,
Massachusetts on August 26, 1843. On this date he received
D.S. Patent No. 3228 for a nachine he called the
Chiroqrapher. It consisted of "a horizontal circular index
wheel, with vcritcal plungers carrying the characters
'■ounted round the periphery, rotated into current register
and depressed to bring the characters down on the paper."*
This unit was then nounted on a platter that had line and
letter spacing. The inking mechanism was provided by an
inked roller. Like others, the nachine worked well, but
also like the others, it was too slow.

After 1850, there were numerous inventors working on
the typewriter. One such inventor was Dr. Sanule W.
Francis, a New York physician, who in October 1857 secured
O.S. Patent So. 18,504. In 1863 his final product was
essentially a snail piano that typed. Its speed was said
to have exceeded that of the pen, but its large size nade
it impractical.*

Sone twenty different inventors in America, Enaland,
France and Cernany worked on the typewriter between the
years 1C29-1C73 before the first practical nachine was

developed. A complete list of these developments is
provided in Table II-1.

An article in Scientific American for July 6, 1867,
carried a description of a "Type Writing Bachine" which an
Alabama inventor, John Pratt, had exhibited in London. The
article was read by a Christopher Latham Sholes of
Hilwaukee, Wisconsin. Sholes had desiqned and built a
aachine for imprinting individual addresses on newspapers
to custoners subscribinq by mail. His nackine, operated by
a treadle, could stamp the papers in the narqin with
'addresses already set up in type. Sholes had also invented
a nunberinq or paginq aachine in principle like the
familiar numbering hand stamp of the present day, with
types on the peripheries of rotating discs. His heavy and
fixed piece of machinery numbered efficiently without
picking up a separate plate of type for each piece to be
printed.*

A crude vorkinq model of the typewriter had been
developed by Sholes with the help of co-workers Carlos
Glidden, a lawyer, and Samuel K. Soule, a draftsman and
civil enqineer, and Matthias Schwalback, who had been a
builder of tower clocks in the Hhine country. Some 25 or
30 models of Sholes* typewriter were developed before 1873,
when it was accepted for manufacture. 7 Sholes had a lonq
experience as a printer. For aid in financing his projects
and ultimately in producing the projects for manufacture.

TABLE II-l

HIGHLIGHTS Iff TES CHRONOLOGY OF THE
WRITING MACHINE (1714-1938)

Dote

Invention and/or
Develorcent

Country

Inventor or
Manufacturer

January 7, 1714

"Writing Machine"

England

Henry Mill

1784

For embossing
printed characters
for the blind

Prance

L'Eemlna

JUly 23, 1829

"Typographer"

America

William A. Burt

UB33

Typebars converged
at center. "Ktyro-
graphlc machine or

Pen"

France

Xavier ProJean
(Progln)

1843 (1849T)

"Raphigraphe"

France

Pierre Foucault

1843, 1845

"Patent Printer";
"Mechanical Chiro-
grapiicr", (Chlro-
graphie); "Writing
Machine"; platen

America

Charles Diurber

1845

Connected pencil,
traces letters

America

1850

Double hand Im¬
pression machine

America

IB50

Ho name

America

Oliver T. Eddy

1850

—

America

J.B. Fairbanks

1852

"Mechanical Typo¬
grapher"

America

JJK. Jones

1854

Typo graph

America

R.S. Thomas

JUne 24, 1856

"Printing Instru¬
ment for the Blind"

America

Alfred E. Beach

TABUS H-1 (continued)

Date

Invention and/or Country

Develorcent

Inventor or
Manufacturer

1856

Typei&eel Princi- Aserica
pie

J. H. Cooper

1857

"Printing Machine"} Aserica
Tour rows of keys

In peg fora; inked
ribbon

Dr. S. W. Francis

I 858 (I 85 U 7 )

"Improved Kechani- America
cal Typographer"

Henry Harger

X 863

"Improved Kechani- Anerica
cal Typographer or

Printing Apparatus"

F. A. deMay

1863

"Improved Hand Prin-Anerica
ting Device or Me¬
chanical Typogra¬
pher

Benjamin Livermore

186*

1866

Austria

Mitterhoffer

Abner Peeler

"Machine for Anerica

Writing and Prin¬
ting

1866

"Pterotype" (first Aserica
practical type-wheel
typewriter)

John Pratt

1867

First experimental Anerica
one-letter yjodel

C.L. Sholea

1867

First working model Anerica
"Type-writer”

C.L. Sholea

1867

"Machine for Writing -

-with Type or Printing
on Paper or other

Substance"

Thomas Hall

TAKES H-l (continued)

Date

Invention and/or
Development

Country

Inventor or
Manufacturer

1868

Movable type plate
and hammer

America

—

Jtrne 23 , 1868

"Type-writer"
(capitals only)

America

C. L. Sholes

1870-75

"Writing Ball"
example radial-
strlking-plunger
class

England-

America

R.J.M. Hansen

1872

Spring-seated keys
carry type

America

—

l 87 h

First commercial
typewriter(capitals
only)

America

Remington for
Sholes and Gliddcn

I 876

Remington Ko. 1
(capitals only)

America

Remington

1878

Model 2 Remington America
(capital and small
letters-first shift)

Remington

About 1878 ( 1833 ) "Caligraph"(wrote America Yost-Wagner

capital and srn.ll
letters for first
tine with its first
keyboard ever made

1878 Type on ends lever America -—-

1881

Elastic type plate

America —--

1884

Oscillating type
segment and hammer

America ——-

1890

First portable

America G. C. Blickensderfer

1896

Ford typewriter

_.... __....

TABLE H-l (continued)

Sate

Invention and/or
■ Development

Country

Inventor or
Manufacturer

1696

First automatic
ribbon reverse

America

Remington

September

1896

First "noiseless"

- typewriter

America

V.P. Kidder - C.
C. Colby

1920

First standard
keyboard portable

America

Remington

1924

noiseless Consoli- America
dated standard key¬
board embodied and
introduced worldwide

Remington

1931

noiseless portable

America

Remington Rand
(changed in 1927
Iron Remington)

1937

First Ghort stroke
standard typewriter

America

Remington Rand

December

1938

ftodel 17

America

Remington Rand

Adapted froo: Arthur T.. f»utlce. Hr. Typewriter (Boston: Chris¬
topher Publishing House, 1961) PP* iOlJ.

be Has associated with James Densiore. Eensmore bad
started oat in life as a peddler. But from these travels,
he Has led into prospecting for oil, as Hell as taking the
tine to read Ian. In 1848 he passed the Pennsylvania Bar
examination. Thereafter he became a newspaper editor and
practiced his law in some individual projects.

To produce the typewriter, Densnore felt that a
company with experience in nanufacturing was necessary. He
proposed to take the typewriter to K. Remington and Son,
located in Ilion, Mew York, in the Kohawk Valley.

B. Ihe Remington Com pa ny: Hanufac turi ng in Volum e

In 1816, a boy named Eliphalet Remington had asked
his father for a rifle. When his father said he did not
have the coney to buy one, Eliphalet Remington collected
some scraps of steel from his father's forge and made his
own gun.The result was so excellent that his neighbors
began commissioning him to make rifles for them.

On August 12, 1861, Eliphalet Remington died of
appendicitis and his three sons carried on with the work.
Philo, the oldest, ran the armory and purchasing of raw
materials. Samuel was the one who had the salesmanship and
the vision for the future. Eliphalet III, the youngest
sou, did all of the financial work for the firs.Samuel aril
Philo were the ones who continued the tradition of

iaportinq proaisinq inventors. On April 10, 1865 the Civil
Bar was over and the qovernaent cancelled all or
Beainqton's aras contracts on April 11th. But the
Reainqtons had planned well. Only when Saauel died did the
coapany flounder.®

In 1864 the Heainqtons had turned a foundry into a
factory equipped to turn out industrial fara implements and
other durable qoods. The Reainqtons tried to diversify,
for they knew the unstable nature of the ailitary arns
business. However the aqriculture works business dwindled
*as other factories spranq up in the nidwest. The
reversible aower they developed lost *350,000. Their
scatlerqood cottonqin also failed. The horse powered tire
enqine was profitable for only a short period of time. The
Beninqton sewinq machine which had SI aillion in capital
floundered when they hired W.H. Hooper to sell the iten.
He went berserk and opened offices all over the country
losinq all of the capital. The Reainqtons personally stood
behind the $1 aillion loss.

It was in February 1373 that Harry Harper Benedict of
the Reainqton Company noticed a typewritten letter in his
employer's office. He seemed very impressed. Later he and
Philo cot with Denssora at the Osqood Hotel. Benedict said
that they "... must on no account let this qct away."* On
Harch 1, 1873, a contract was siqned with the Reminqtons

for the manufacture of the typewriter. The Beninqtons felt

that this machine had the advantages over simple
handwriting of legibility, rapidity, ease, convenience and
economy. The fieoinqtons agreed to have their mechanics
renodel the machine and to manufacture at least 1,000
units, plus 24,000 at their discretion. 10 However, in
September 1873 a recession started with the leading banking
firm of Jay Cooke C Company qoing bankrupt. The winter of
1873-1874 was worse but in the Sprinq of 1874 Remington
delivered. Killian K. Jenne of the Remington Coapany
brouqht out the Remington No. 1 which looked very much like
*a sewing machine. A firm formed by Densnore and an
associate, Georqe Washington Newton Yost, whose background
was similar to Densmore's, was started to market the
machines.

Thus, the typewriter industry was on its way. The
basic keyboard had been established in 1872. In 1878 a
shift was added in which a lower case was provided for as
well as an upper case. This was provided by the Remington
Mo. 2 machine whereas the Herainqton No. 1 could only type
in capital letters. The shift key was developed by Lucier
S. Crandel and Byron A. Crooks, both of whoa worked under
Jenne. In 1893 a front stroke was achieved so that the
typist could see what was beinq typed without lifting the
platen.

The typewriter itself was the result of many
influences. Efforts in developing a number of other

ele«ents contributed to its Baking. The typewriter
included concepts from novable type, the piano, the sewing
aachine, the telegraph, and the clock. Clockwork suggested
the idea of the escapeaent. A telegraph sender provided
parts for the first writing aachine aodel. The first
typewriter had a treadle for returning the carriage, thus
reflecting the sewing machine. The piano contributed the
concept of the free and swinging ares for iaprinting the
letters.

By 1874 the marketing of the typewriter was in full
'swing. During July .to December 1874, 400 of the Kemington
aannfactured typewriters were sold at a price of $125. k
nanber of other models from different nanufacturers were
also being developed at this tine. The Hemington machine
was of a typebar construction. Also popular were the
machines utilizing the concept of the typewheel. This form
was started by John Pratt who built several machines in
England -- all of which were not successful. James Hammond
and Lucien S. Crandall, also inventors, were taking out
patents on a typewheel aachine. A deadlock was reached
between the three competitors. Pratt finally yielded to
Haaaond, thus receiving a royalty. Crandall applied for a
patent on a typesleeve instrument. The first Haanond
patent was issued in 1880 which led to the development of
the first practical typewheel aachine. Haaaond had a
seni-circulur keyboard called the "ideal" keyboard but

eventually switched to the universal keyboard. By 1923,
the Hannond typewheel machine was still the leading machine
of its kind.**

By the 1880’s coapetition was keen. In 1878

Beainqton used Fairbanks 5 Co., the famous scale

aanufacturers, to handle the selling of the aachines.

However, Yost was still the best salesman of the
typewriters. Under hia he had a man by the naie of Killian
Kyckoff who was also an excellent salesman. Sales were
slow at first with only *1,000 machines made and sold during
‘the first four years of the Reminqton manufacture. Then in
1879 Yost quit sellinq Remington typewriters. He and E.H.
Johnson, a manufacturer of bandages and adhesive tape,

formed the American Writing Machine Company. Yost used
some of Censmore’s patents of the Typewriter Company. By
1881 they were ready for marketing. At that time, the No.
1 sold for $60 and the Ho. 2 for $80. Thus, Yost’s machine
-- "the Caliqraph" — was cheaper than the Remington. 12 The
Beainqton's fouqht back and retained the firm of Kyckoff,
Seamans 6 Benedict to take over the sellinq of the
machines. An aqrcement was reached whereby the selling
agency would take all the nachines Remington could produce.

And in that year

1200

Beainqton

machines

were sold.

Densmore,

who

had

given

patents

to both

the

Remingtons and

Yost,

was

getting

tribute from

both

sides. In 1880 his company, the Typewriter Company,

received fees from 610 machines.In 1881 fees were received
from 1170 machines. This was followed in 1682 by 2273
units, in 1883 by 3376 units and in 1884 by 4000 units.

Durinq the years 1881-1884 there were 7,000 caliqraph
Machines sold. Sy 1885 the field widened and one could buy
a Hammond, a Crandall and a Hall eachine — all of which
vere separate from the Typewriter Coapany patents. Still
however, the best sellers were the Beainqton and Caliqraph
Machines. Durinq these years Kyckoff, Seamans C Benedict
repeatedly lowered their prices. In 1883 the Reminqton
'Machines sold for S100 with a shift and $80 without. By
1885 this bad been reduced to $95 with a shift and $75
without. Keanwhile, the Yost prices had increased to S85
with a shift and $70 without.Throuqh these years the
Reminqton Machine was still more popular than the Yost
Machine. In 1885 Yost sold as many Machines as he had in
the previous four years.

By 1866 the Rerainqtons felt sales vere still not
heavy enouqb and were forced to sell. Benedict went to
Ilion and tried to talk Philo out of sellinq. Vhen he was
assured that Philo was serious ho bouqht the operation for
$186,000 with $10,000 down. The purchasers were Vyckoff,
Seamans 6 Benedict, who took over the equipment and
franchises of E. Reminqton and Sons.* 3 They took the name
of the Reminqton Standard Typewriter Company. However,
after the sale, the Reniuqt.ons had nothinq to do with tha

typewriter that carried their name.**

Philo had sold the typewriter operation to help tha
Reainqtons qet out of debt. The loney from the sale of the
typewriter division didn’t last a week and left 90 percent
of the outstanding debt unpaid. The Heninqton Company had
been losing money on a number of ventures. In 1882 Samuel
Reminqton died leaving the business to Philo and Eliphalet
III. Neither of the survivinq sons had the business
ability or salesmanship that Samuel had inherited from old
Eliphalet. The years 1882-1886 were ones of steady drain
‘for the Reminqtons. There were no contracts with foreiqn
governments for arms which meant that the sporting arms
business would have to carry the armory. The winter of
1885-1686 was a time of crisis which eventually led to the
sale of the typewriter. On April 4, 1889 Philo had died
and Eliphalet III retired from the business.»s Thus an era
had ended. The management of the arms company was out of
the hands of the Remington family forever. Younq blood had
entered and once aqain the Remington Arms Company became
prosperous.

The sale of the Typewriter concern by the Remingtons
was a mistake. An article in the Scientific American
estimated that in 1886, 50,000 machines were made and sold.
Two years later, the Remington Standard Typewriter Company
was making 1500 machines a month and still couldn't keep up
with the demand. In 1640 a federal census of Typewriters

and Supplies estimated that, there were 30 established firms
with a capital investment of $1,421,783 with 1,735
employees, $1,078,203 in total wages, $632,723 in cost of
materials and $3,630,126 in the value of the finished
products.** In addition to the production of the Remington
Ho. 1 and So. 2, the Remington No. 3 was introduced to meet
the requirements of the British market. And by 1890 the
typewriter was an important element in the British
commercial world.

As had occurred in a number of other industries at
‘the turn of the century, a combination amonq a number of
typewriter companies took place in 1893. The combination

included the Remington Company, the early promoters,
Densmore and Yost, and the four Smith brothers, who had
formed a typewriter company. The resulting combination was
called the Union Typewriter Company of America. 17

Alonq with the rivalry that existed among thi
typewriter manufacturers an equally intense rivalry
developed between two competing systems of typing. The
touch method of typing utilized the single keyboard and the
shift key while the other methods utilized the double
keyboard. The dispute was finally settled at Cincinnati in
July of 1080. A contest was held between a Mr. Hc3urrin
using the touch method and a Nr. Traub using the other
method. NcGurrin won easily havinq taught himself the
touch Method of typing in 1878.

C. Hew E ntries

But the forces of competition remained vigorous.
Franz X. Haqnar, who had designed the variation of the
Bemington called the Caliqraph, for Tost, was not included
in the new Union Typewriter Company. Franz - Wagner, with his
brother H. L. Baqner, developed a visible front-strike
desiqn. John T. Underwood and his father, John Underwood,
who had been a pioneer in the ribbons and carbon business,
*bouqht the Waqner’s machine, beqinninq production in 1895.
By 1099, Underwood moved to Hartford, Connecticut where a
larqe factory was built to handle the larqe volume that had
been achieved by the popularity of te Underwood Model 5. ,a
The Underwood was tho first machine to achieve prominence
with tho front-stroke machine. It represented a new
departure in the arranqesent of the typebars which were
placed in a sequent in front of the carriage thus allowing
the type to print on the front of tho cylinder. It has
been pointed out that this principle was the solution to
tho problem of visible vritinq.*’

In 1903, the four Smith brothers left the combination
that bad been formed into tho Union Company. They felt
that the Union Typewriter Company laqqed in manufacturing a
visible front-strike typewriter. Their company was called
the L.C . Smith and Brothers Typewriter Company, since L.C.

2 6

Smith was the oldest brother.

At this tine another inventor cane alonq. He was
Edward B. Hess, "a former silk salesman and a brilliant
tinkerer with mechanical qadqets." 20 Hess was aided by an
excellent technical nanaqer, lewis C. Kyers. Hess reviewed
his competition in the typewriter field. He felt that
Underwood and L.C. Smith were correct in their emphasis on
visibility. He recoqnized Reminqton’s powerful marketinq
and distributinq system. But he saw room for considerable
iaprovement in the typewriter, which he felt would enable
"such a typewriter to obtain an important share of the
market.

Hess saw the followinq defects to be remedied: (a)
the typewriter presswork could be improved, (b) while
improvements had been made in increasinq visibility, the
existinq clutter of knobs, bars, ribbon mechanism and other
prolections spoiled the operator’s clear view, (c)
typewriter costs were too hiqh and by improved desiqn could
be reduced, (d) he felt that the ease of operation of the
typewriter from the operator’s point of view could be
increased. Durinq his lifetime Hess received IhO
typewriter patents.

The new Hess typewriter achieved a liqht, fast touch.
Hess had invented a typebar action that beqan by novinq
slowly when the key was depressed and accelerated as the
key continued down. He had reversed the linkaqe so that

the action was a pull rather than a posh, representing an
enerqy-savinq innovation. He removed much of the friction
front the escapement, the toothvheel that links the keys
with the carriage and moves it alonq one space when a
letter is struck.Hess and Hyers also achieved a
friction-free ball-bearinq one-tract rail to support the
weiqht of the carriage as it moved back and forth, a new
paper feed, a shield to keep eraser crumbs from fallinq
into a nest of typebars, and "total, uncomprociised
visibility." 2 *

With the establishment of the Royal Typewriter
Company in 1904, what were to be the big four of the
typewriter industry had been established. These were:
Remington (The Onion Typewriter Company), Underwood, L.C.
Smith, and Royal. But by 1909 there were a total of 89
separate typewriter companies in the Onited States.
Indeed, well over 100 firms were established after the
formation of the Royal Typewriter Company in 1904. Host of
these post-Royal firms were started in the decade
1905-1915.

0. Proliferation of Entrants

During the period immediately following the
establishment of the Royal Typewriter Company, a large
number of companies were in the competition for typewriter

sales. Some of the names continue to be familiar even as
late as the post World War II period. Others never made a
siqnificant penetration into the industry. Their names
include the followinq: Acne, Alexander, Allen, American,
Atlas, Barlock, Bennett, Benninqton, Blake, Brooks,
Century, Cfcicaqo, Commercial visible. Corona, Cram,
Crandall, Crown, Carlinq, Dauqherty, Demountable, Denscore,
Dollar, Duplex, Edland, Elliott-Fisher, Ellis, Emerson,
Essex, Fay-Sholes, Federal, Ford, Fountain, Fox, Franklin,
Garbell, Hammond, Harris, Hartford, Hooven, International,
‘Jackson, Jewett, Junion, Keystone, HcCall, Hanoqraph,
Ferritt, Eolle, Ronarch, Hoon-Hopkins, Norris, flunson.
National, Nickerson, Noiseless, Odell, Official, Oliver,
People's, Pittshurqh, Postal, Rapid, Reliance , Reninqton,
Rex, Royal, Schiesari, Secor, Sholes Visible, L.C. Smith,
Smith Premier, Stearns, Sterlinq, Sun, Taylor, Triumph,
Type-Adder, Underwood, Victor Visiqraph, Walker, Williams,
Woodstock, World, lost, and Yu Ess. Then there were a
number of leadinq imported machines includinq: Adler,
A.E.G., Ideal, Kappcl, Mercedes, Hiqnon, Kcqina, Saxonia,
Titania, Torpedo and Urania from Germany; Empire froa
Canada; Hermes from Switzerland; Hesperia, Olivetti and
Vittoria from Italy; Imperial, Salter and Wellinqton froa
Enqland; Contin and K.A.P. from France; Japy from Japan .**
By 1910, the number of patents issued for typewriters
totaled 6,200. The sales volume in the U.S. for

2 ?

typewriters had reached $2 Billion.

E. Competitive Process es in Operation

The early history of the typewriter provides some
instructive lessons in the processes of competition. The
Dnion Typewriter Company, with Reminqton as its most
important component firm, had achieved a dominant position
provided by its advantaqe in qettinq started first in 1873.
This, plus the stronq marketing orqanization, gave
'Reminqton a dominant position during the 20 years
intervening before the formation of the Union Typewriter
Company with Reminqton as its principal component.

If the combination expected that because it
represented a larqe portion of the typewriter industry, its
market position was protected, it was a serious error.The
establishment of Underwood in 1B95 and then the formation
of the L.C. Smith Typewriter Coupany in 1903 brouqht
conpotition in the form of technical innovation. The
front-strike visibility introduced by Underwood and h.C.
Smith enabled them to cut substantially into Remington's
position.

The achievements of Underwood's Model 5 wore
particularly outstanding, so that by 1920 Underwood's sales
of Model 5 wore equal in quantity to all of the other tiros
in the typewriter industry combined. The Model 5 was a

Tisible writer which had the advantages of the blind
machines as well as some of its own. Eesides being a
visible nachine, the touch of the machine was a light one.
The Underwood wachine was the first to have a tabulator as
part of the actual typewriter which was supplied without
additional charqe. The machine was a good stencil cutter
and as a canifolder its capabilities were unequaled. Other
machines with a large number of sheets inserted produced
indifferent alignment resulting from the letters coming
fro» all directions; whereas with the Underwood the common
‘center was not chanqed because the letters were arriving at
the printing point from one direction. Other advantages
included the fact that corrections were made easily, the
type could be cleaned in a moment, the machine was a silent
machine — one of the quietest, and the escapement
mechanism was sinqularly rapid. In fact all of the
advantages could be summarized in this statement:

... the Underwood claims to be a complete
typewriter, complete in itself, without the
addition of any extra devices or attachments. It
has, therefore, no special plater for manifolding
and no special tract to preserve alignment while
so doinq; no additional holders for envelopes or
cards, no countinq device, no tabular scales;
nothinq in tact, but what is supplied at the
first cost with the machine. 23

Underwood was so pleased with its flodcl 5 that the
tir« laqged in the adoption of a new model. Thus in

laqqinq in brinqinq out new developsents, Underwood fell
behind, so that by 1938, Royal had the doninant position in
the typewriter industry. The subsequent history will be
analyzed in a later chapter.

FOOTNOTES TO CHAPTER II

1. John Zellers, The Typewriter:^ A Short History on its
75t h Anniversary (Rev York: The Newcomen Society of
England, American Branch, 1998) pp. 8-9.

2. Herkimer County Historical Society, The St ory of th e
Typewriter 18 73-1923 (Herkimer: Herkimer Historical
Society, 1923) p. 20.

3- ifeid., p. 20.

9. Tilqham Richards, The History & Development of
'Typewriters (London: Her Hajesty's Stationery Office, 1969)

p. 19.

5. Zellers, op. cit .. pp. 9-10.

6. Richard !!. Current, The Typewriter and the Hen who Hade
It (Urbana, Illinois: The University of Illinois Prass,
1959) pp. 9-10.

7. Zellers, op^ cit.. p. 10.

8. Hatch, Aldan, R eni n ato n Arms - AD American History (Sew
York: Rinehart 6 Co., Inc., 1956) p. 80.

9. Ibid., p. 172.

10. Current, op, cit., p. 65.

11. Georqe Hares, History of the Typewriter, (London:
Gulbert T. Pitnan, 1919) p. 190.

12. Current, op,, cit .. p. 103

13. Current, op. cit., pp. 108-109

I 1 *- Ibid., P- 109.

15. Batch, op. cit., p. 176.

16. Current, op. cit., p. 112.

17. Bruce Eliven, The Wonderful Writing Machine (New lork
Bandoa House, 1954) p. 87.

18.

Ibid.,

p. 88.

19.

fares.

op. cit., p. 187.

20.

Bliven

, QSjl Sii., pp. 88-

21.

Ibid.,

p. 89.

22.

Ibid.,

p. 95.

23.

fares.

op. cit., p.190.

CHAPTER III

ECONOHIC FHAKEWORK OF THE TYPEWRITER INDUSTRY

This chapter on the economic characteristics of the
typewriter industry will be concerned with five specific
areas:

A. Product Types and Variations

B. Cost and Production Characteristics

C. Barket Structure Analysis

D. New Entry Characteristics

E. Profit Performance over Time

A. Product TY£"§ and Variations

Typewriters are now divided into three major
catcqories: Eanual, Electric, and Specialized- The manual

and electric typewriters are further divided into office
and portable types. The specialised typewriters are those
used in connection with calculating and billing, or in
connection with data processinq. For example, IBM
manufacturers a maqnetic tape solectric typewriter which
records material on a magnetic tape and produces final
copies! at ISO word:; per minute. At present the BT/ST can
be used to enter data directly into the Il’B Syster/360
computer through a new tape cartridge reader. Royal

produces an automatic typinq system which performs a task
similar to the IBR product but without the computer hookup.
Royal also manufacturers a machine called the 5000 Source
Document Writer, which has a hiqh speed automatic system to
produce punched paper tape or edqe punched cards while
typinq oriqinal source documents such as purchase orders,
sales orders or shipping memos. The machines described
above are mostly related to the task of typinq oriqinal
documents and simultaneously feeding the information into
computers. Other machines related to the computers are
'typewriters that allow direct access to the storage unit
for corrections or revisions to the proqram or data;
printers which provide output by line rather than by
letter; and keypunch machines which utilize similar
features of the typewriter but which provide output through
cards or tape.

Some significant changes have been takinq place in
the share of market accounted for by each of the
categories. Fiqure III-1 provides a summary sheet of
industry sales for the years 19*»8 to 1967 broken down
between the main categories of portable, office and
specialized typewriters. Data for all the fiqures in this
chapter and the figures to all chapters are provided in the
Appendix to the Dissertation. The figure indicates that
portables held a relatively constant share of the market,
fluctuating in the range of 22 to 2C percent over a long

FIGURE III-I

PATTERN OF TYPEWRITER SALES IN
THE UNITED STATES, 194801967

(A)

FIGURE III-I
(Continued)

(B)

(a) Data not collected in these years

Source: Facts for Industry Series M35C, 1958-1967.
Bureau of the Census, U.S. Department of
Cor.imorce.

period of years. The office Machine segment of the Market
has held steady at about a 70 percent Market share.
Specialized typewriters have been increasing their share up
to about the 10 percent level.

h significant shift has taken place, however, in the
Market share trends between the Manual and electric
typewriters. This is best seen by analyzing the share of
the office typewriter market accounted for by the two
types. In 1948, office electrics accounted for 14 percent
of the total office typewriter Market. By 1956 this
’percentage had increased to a 50 percent share of the
Market. By 1967 the share had risen to 76.5 percent.
Thus, share of the office typewriter narket accounted for
by the electric typewriters has been increasing from two to
five percentage points each year. Today the market share
of the office electric market represents the segment of
qreatest significance, for this is the largest portion of
the total typewriter Market. It is the most rapidly
qrovinq segment in both absolute and percentage terms. Its
share of the office typewriter Market is likely to continue
to increase to well over 90 percent in the years ahead.

Thus a number of changes in the structure of the
Market have been taking place.In addition, changes have
occurred in the O.S. share of world typewriter production.
The nature of foreign typewriter markets and the reasons
for the shifting O.S. role in these Markets will be

3 ?

discussed in Chapter V. Another method for studying change
in the typewriter industry is the examination of changes in
cost and production characteristics of the industry.

B. Cost an d Produc tion Characteristics

The typewriter industry employs about 19,000 persons
with a total annual payroll of $117 million. About 14,000
or 75 percent of the employees are production workers. The
other 5,000 employees are administrators, enginerring,
’marketing, technical, and training personnel. 1

Important to the manufacture of typewriters is the
development of component parts necessary for assembly.
About 70 percent of the 21 establishments in the industry
perform other working operations. These fifteen
establishments employ over 95 percent of the total
production workers in the industry, of whom 70 percent are
employeed in metal working operations. The types of
operations involved in metal working and the percentage of
employees engaged in each type of operation arc as follows:
Assemblers (562), machinists (12’), stampers, blockers and
formers (10"), tool and dye makers (51) and automatic screw
machine operations, electroplating, painting and
lacquering, plastics molding, and heat treating of metals
(42). This provides some indication of the nature of the
manufacturing operations in the production of typewiiters.

The typewriter is a complex item to produce. The
number of parts is large, ranginq fron 1800 for a portable
to as hiqh as 3800 for an office electric typewriter.
Other attributes are suqqested by Figure III-2, which
presents a nuaber of cost of production characteristics of
typewriters for the period 1953-1965. The value added per
production worker for typewriters in 1965 had reached over
$21,000. Value added is 75 percent of shipments for the
typewriter industry. In contrast, value added per
production worker for computing and related machines is
'over $30,000, while valued added is 64 percent of
shipments. The value of shipments in the typewriter
industry approximated $400 million in 1965 with capital
expenditures fluctuating, but averaqinq about $10 million
per year. Total employment in the industry in 1965 was
over 18,000, with a payroll totalling almost $120 million,
tiaqcs per production worker »an hour reached $2.72 as
compared with $3.19 for the computing and related nachines
industry. The value added per dollar of wages, however,
was 54.01 in the typewriter industry compared with $4.69 in
the corputinq industry.

There are four categories in the SIC category 357
office nachines. These are computing and related machines,
typewriters, scales and balances, and office machines not
elsewhere classified. It is of interest to note the shire
of the business machine market accounted for by typewriters

FIGURE-III-2
(Continued)

Value Added as a
Percent of Shipments

Value Added per
Production Worker

Amounts in

Value of Shipments per
Production Workers

Value Added per
Dollar of Wages

Amounts in

Source: Industry Profiles , 1958-1965 (Washington: U.S.

Government Printing Office, B.D.S.A. 1966) p. 105.

over tine. This is shown in Fiqure III-3. The share of
typewriters in this total market has declined between 1958
and 1965 from 14 percent of the total to 9 percent of the
total. The share of all the other cateqories of business
machines has also declined, except for computinq and
related machines. Computing and related machines rose from
66 percent of this total market to 70 percent during the
interval 1958-1965.

It is clear that computinq and related machines have
taken over many of the functions of the other types of
'business machines. Typewriters are playing a much larger
role in connection with computer use and other data
processing and telecommunication devices. Without the
ability to join effectively and relate to this most rapidly
expanding segment of the market, a firn concentrating
exclusively on typewriters would be certain to run into
increasing, business difficulties.

To this point a description of the various product
catagories in the typewriter industry and the relative
chanqes that have occurred within these cataqories has been
presented. A description of the various cost and
production characteristics was also presented to further
clarify the picture of the typewriter industry and to
demonstrate the ever increasing role computers and related
products are playinq in the total office equipment field,
kith these facts in mind one may now turn to an analysis of

FIGURE III-3

SHARE OF PRODUCTION DATA FOR
INDUSTRIES IN SIC 357 CATEGORY

(a) Data not collected in these years

Source: Industry Profiles . 1958-1065 (Washington,
D.C., U.S, Government Department of
Commerce, Business and Defense Service
Administration, 1966) p. 105 .

the Backet structure of the typewriter industry.

C. Karke t Structure An alysis

It was initially stated that one of the foremost
reasons for undertaking this study was to analyze the shift
that has taken place in the aarket structure of the
typewriter industry and to determine the inpact of this
shift on the future competitive atmosphere of this
industry.

It is hypothesized that the typewriter industry
evolved throuqh three distinct market structure phases.
First, the industry was highly competitive; then it was
transformed into an oligopoly; and finally it evolved into
a partial monopoly. The purpose of this section is two
fold: first, to determine how the typewriter industry could
conform to the traditional economic definitions of
oligopoly and partial monopoly and secondly, to determina
the validity of the hypothesis on market structure.

An oligopolistic industry can be defined as one in
which the number of sellers is saall enough for the
activities of a single seller to affect other firas and for
the activities of other firms to affect him. Typically,
firas in an oligopolistic industry sell differentiated
products. The products are good substitutes for each
other—that is, they have high cross elasticities of

demand—but they have their own distinguishing features.

Hhen

sellers

an oligopoly

arc numerous and

relatively

small—

tho

number of

fringe sellers is

qreat—the interdependence of sellers is less, collusion is
harder to attain and difficult to maintain, and performance
tends tovard that of atomistic competition. This is due to
the fact that the number of firms is so great that no one
firm or seller has any influence on price.

Hovefer when fewer and fewer firms account for a
continually larger share of the total market of that
‘industry—with the number of frinqe sellers being
relatively few—the industry would tend to be fairly
concentrated and the pure competitive nature of that
industry would be seriously hindered. Concentration in
this context refers to the ownership or control of a large
portion of some aggregate of economic resources or economic
activity.

In the past concentration of economic power has been
deplored on two qrounds. First it is not considered to be
consistent with the democratic ideal of a wider dispersion
of control of economic affairs among a larger proportion of
the population. And secondly the existing pattern of
distribution of economic power could imply a reduction in
the effectiveness of competition both from the standpoint
of limit!nq the availability of new entry as well as the
possibility of deriving excessive profits from potential

collusion

Various federal aqencies have distinguished

oligopolistic industries according to the degree of seller

concentration as measured

both

the proportion

industry output supplied

by a

few

sellers—2,4,6,

or 8

sellers—and by the number

of small

sellers who operate

the fringe.

An oligopoly can consist of a high, medium, or low
degree of concentration where the 8 largest sellers
together supply 80, 60, or 40 percent of the output,
‘respectively. Generally speaking high concentration is
deternined when the eight largest firms supply 70 percent
or more of the industry market. Koderate concentration
exists when the 8 largest firms account for less than 70
percent of the market. As previously mentioned, the reason
to distinguish oligopoly on the basis of the degree of
seller concentration is that with a hiqh degree of seller
concentration express or tacit collusion is possible with
excessive profits resulting. This is due to the high
degree of interdependence of sellers when they are very few
and large relative to the total market. 2

With the basic concept of oligopoly established, both
in terms of the theory and the way in which it is measured,
one may next turn to the typewriter industry itself and
determine if in fact this industry’s market structure fits
within the formal framework of oligopoly. The typewriter

industry, for the period 1935 through 1966, was
characterized by a relatively high deqree of concentration
as measured by the four largest and eight largest firms.
These data are presented in Table III-1.

The percentage share of industry value supplied by
the four largest firns fluctuated within the relative range
of 76 to 83 percent during the post-war period. The share
of the eight larqest firms was 99 percent for' five of the
six years for which the concentration ratios were
calculated.

■ One may thus observe that during this period the
typewriter industry has been very heavily concentrated.
The deqree of concentration as measured by total industry
value (sales) would indicate that this industry definitly
fits within the structure of an oligopolistic industry.

Another way of determining the degree of oligopoly
within the industry is thronqh an analysis of the chanqe in
the market shares for individual firms over time. From the
previous chapter, it can be seen that during the early
1900's the industry was fairly competitive, with some 80 to
90 foreiqn and domestic producers of typewriters involved.
Immediately proceeding World War II, the industry was
characterized as one with five predominant producers. The
four larqest -- Remington, Royal, Underwood and L.C. Smith
— each had 20 percent of the market, with International
Business Machines accounting for 10 percent of the market. 3

TABUS HI-1

MARKET SHAKE RELATIONS, TYPEWRITERS

Tear Humber of Product Value Percentage of Industry Value of

_ Companiea ( $ In millions) Product Supplied Br _ ’

Four largest firms Eight largest
_flies

1935

(HA)

1947

154

1954

173

1958

230

1963

315

1966

(HA)

534

Sources: Concentration Ratios In Manufacturing Industry , 1958, A

report prepared for the Senate Subcommittee on Antitrust and
Monopoly of the Committee on the Judiciary (Washington, D.C.:
O.S. 3epartment of Commerce, Bureau of Census, 1562). Also,
see the same publication for the year 1963 , which appeared In
1964.

Data for 19 66 from Annual Survey of Manufacturers , 1966 , U.S.
Department of Ccncerce, Value-of-Saipaent Concentration Ratios
by Industry.

Thus an industry that once was comprised of close to
100 firms consolidated into one with five firms accounting
for 90 percent of the market — a situation which, by the
definition stated above, can only be termed oligopolistic.
Today , however, the picture is considerably changed.
International Business Hachines, which had 10 percent of
the market in the early 1940's, has substantially increased
its market share while the others have decreased their
share. Table III-2 presents market share relations for the
five largest domestic producers from 1960-1967. It can be
“observed that Royal has had a steady decline of its
over-all market share from 1960 to 1967. This might
reflect the firm's concentration in the manual line of
typewriters—a line also decreasing as a percent of total
industry sales (as shown in Figure III-1). Data on SCM
indicate that the market share has been maintained, and in
1967 a small increase was noted. Data for
Olivetti-Undorwood is scarce and not much can be concluded
about it except that apparently a decrease in its share of
the market occurred from 1966-1967. It appears that IBS
has increased its market share from 29.0 to 33 percent
during the two years for which data was available. Data on
Remington was not available, and no conclusions regarding
it can be reached (except that, as noted in 1967, its share
of tho market was only *> percent). It is apparent that,
since World War II, IPK has been increasing its market

TABLE XU-2

MARKET SHARE RELATIONS OVER TIME
($ Amounts In Millions)

Tear ended Industry Olivetti-

JUne 30 •

Sales

Royal

SCM

Underwood •

IBM

Remington

($ Amounts
In 000's)

Sales

Solea f

1959

$277,677

$77.7

28.0

$38.0

13.7

$ (a)

$(a)

$ (a )

i960

273,973

68.6

24.6

(a)

1961

304,416

70.6

23.2

36.1

u.8

(a)

(a )

(a)

1962

327,972

72.8

22.2

41.0

12.5

35.7

10.9

95.2

29.0

(a)

1963

325,578

73.9

22.7

43.6

13.4

(a)

(a )

1964

362,837

76.2

21.0

29.6

8.2

(a)

1965

430,066

86.4

20.1

(a)

(a )

1966

564,191

U6.8

20.7

(a)

85.8

15.2

(a)

1967

490,983

95.0

19-3

86.0

17.5

65.0

13.2

.165.0

33.6

26,0 5*3

(a) Data not era liable

Source: frets for Industry. Series M35C, 1948-1967, Bureau of the Census, U.S. Dept of CoixeroeJ
VjW 1» 1?62) j SCM. Annual- Reports, 1957-1967} "Olivetti, Crisis of Identity".Fortune
poly IS^ShTesttoony before the Foacrul Trade Comisclon In the application of Litton Industries
to Kcrce with1 Triuaph-Adler, April 10, 1969* Data for Royal was obtained from oompany
sources ; it was not possible to indepondontly verify tho data*

shares at the expense of the other firms.

To further examine this apparent shift one may
analyze the market shares by segments of the typewriter
industry for 1967. This analysis is set forth in Table
III-3. In portable typewriters, SCH is the market leader,
with 43.5 percent of the market. This is attributed to
SCH’s stronq position in electric portables, a field in
which it concentrated early and developed a hiqhly
effective model. Royal is second, but its strength remains
in the manual portion of the portable typewriter market.

*The share of the portable typewriter market held by firms
other than the biq five, accounts for 17.6 percent {the
larqest market share held by this category).

is previously mentioned, the office typewriter market
* {
is divided into two ma-jor parts — the electric and tha

manual. In the manual seqncnt of the office typewriter

market. Royal has the larqest share — 40.8 percent.

Olivetti-Underwood holds the second position with sliqhtly

over 28 percent. Combined , the two account for two-thirds

of the market. When Remington’s share of 14 percent is

added, the three account for 80 percent of the market.

However, as noted in Fiqure III-1, the manual portion of

the office typewriter market is a snail and declining share

of the market. Of the three categories presented in Tibia

III-3, the manual office typewriter accounts for only 17

percent of the total market.

TABIE HI-3

MARKET SHARES BY SEGMEOT OF THE TYPEWRITER INDIE TRY, 1967
($ Amounts In OOO's)

MARKET SHARE PERCENTAGES

OFFICE

Electric

(B) (C)

Full-featured

Electric Manual

(D)

Portable

Total

Sales

IBM

60 . 0 *

73.7*

—

$165

SCM

9.7

2.2

43^5

Remington

2.1

1.7

14.0

5.8

Royal

11.2

9.0

1 * 0.8

23.1

Olivetti-

Ucdervood

10.4

5-5

28.1

10.0

Other

6.6

9.3

14.9

17.6

TOTAL

100 . 0 *

Total Sales

$ 273,685

$ 237,633

$84,o66

$ 133,232

$ 490,983

Percent of
Total

55.7*

1*8.1**

17.1*

27 . 2 *

100.0*

(a) U.S. Shipments of complete typewriter*

Source: Testimony before the FTC, April 10, 1969 . Data was

originally obtnmnd from Royal Coruorsto sources
It was not possible to Independently rerify the

da ta .

In contrast, in the office electric typewriter field
, IBB has at least 60 percent of the market. Royal,
Olivetti-Underwood, and SCK each have about 10 percent. In
the full-featured deluxe seqsent of the office electric
typewriter market, IBB alone held almost three-quarters of
the industry sales in 1967. SCB 's share drops to less than
1 percent because of its concentration in the smaller,
portable type of electric Machine. The full-featured
electric typewriter is a substantial portion of the office
eletric field — 86.9 percent. >

Thus for example. Royal's 90 percent of the manual
seqment of the office typewriter market represents 40
percent of 17 percent of the total markets, or only a 7
percent share of the market, over-all. Table III-4 shows
the individual market shares for each company divided into
the various typewriter categories. As was previously
shown. Royal accounts for 19.3 percent of the typewriter
■arket and is second only to IBB which has 33.6 percent of
the over-all market. This is reflected by the fact that
IBfl has 60 percent of the office electric markets, which is
56 percent of the total market, thus accountinq for 33.6
percent of the entire market. It may also be noted that
SCB has 17.5 percent of the total market followed by
Olivetti-Underwood's 13.2 percent share and Reirinqton’s 5.3
percent share.

According to the formal definition of oligopoly and

TABLE UX-4

OVER-ALL MARKET SHARE El TYPEWRITER INDtSTHY, I967
($ Amounts in Millions)

IBM

SCM

Remington

Royal

Olivetti-

Itaderwood

Other

TOTAL

Office:

Electric

165

274

Manual

•

—

Portable:

—

133

TOTAL

165

8 6

491 “

Share of Total
Typewriter

Market 33.6 17.5

5.3

19.3

13.2

11.0

99.936

( 1 ) U.S. Shipmants of complete typewriters

Source: Testimony before the PTC, April 10, 1969. Data was

originally obtained from Royal Corporate sources.
It was not possible to independently verify the

data.

the methods used to measure concentration, the typewriter
industry would be classified as a hiqhly concentrated
oliqopoly. At first the industry was fairly competitive
with close to 100 firms. Durinq the 1930»s and 1940»s the
industry became an oliqopoly with five predominant firms.
And now the industry can be characterized as one of partial
■onopoly with IEW beinq the dominant factor.

If, accordinq to economic theory an industry is
classified as an oliqopoly, by definition it is reasonable
to expect the presence of barriers to entry. Since the
‘typewriter industry has been shown to fit the qeneral
definition of oliqopoly, an important aspect of a study of
this industry would, of necessity include analysis of any
such barriers present.

D. Wow E ntry Ch a racterist ics

From a theoretical standpoint the condition of entry
into an industry can be measured by the extent price may be
elevated above the competitive level without attractinq new
entry. With the competitive price beinq defined as the
minimum attainable averaqe cost includinq a return to the
owner, one could refine the above definition to state that
the condition of entry is measured by the lonq run qap
between minimum cost and price which the most favored firm
(one with the larqest price-cost qap) can reach without

inducing entry.*

In any discussion of barriers to entry four
particular barriers are qenerally considered.

(D Scale Economy Barrier

(2) Absolute Cost Barrier

(3) Product Differentiation Barrier

(<») Capital Requirements Barrier

Economies of scale arise when production and
distribution costs decline per unit of output as the size
of the plant increases. The optimal scale exists where the
'unit costs are at a minimum. Siqnificant economies of
scale will occur if the minimum optimal scale is a
siqnificant fraction of the total industry sales. This is
a deterrent to entry, for to obtain a significant reduction
in per unit costs, one has to have a large percentage of
the industry output or add to the industry output in a
siqnificant manner. The deterrent to entry will increase
as both the minimum optimal scale becomes a larger
proportion of total industry output and the rise of unit
costs becomes steeper as the scale is reduced below the
minimum optimal scale.

A typical averaqe cost curve faced by a firm is that
which is depicted in Figure Ill-h where over a qiven range
of output the averaqe cost curve is somewhat flat. This
means that there is some ranqe that is larger than the
minimum optimal scale in which a firm's per unit cost is

FIGURE HI-4

GRAPHIC ANALYSIS OF ECONOMIES OF SCALE

Production

and

Distribution
costs per
unit of
output

Q (cin) Q (max)

Scale of the fim (in units of output capacity)

FIGURE IH-2

• I

I f

: :

Source: Joe Ealn, Industrial' Organization (New York: John Wiley
and Sons, 1959) P* 154.

Joe Bain, Barriers to New Ccmetltlon (Cambridge, Massachusetts:
Harvard University Press, !9>o) p. 107.

just as low as the minisuB opticus . 5 Joe Bain, in an
analysis of various barriers to entry, demonstrates the
relation between average cost curves and economies of
scale . 6 Observe that if the new firm enters above X, the
established sellers cannot find a price above minimum cost
OPfi which .will erclude his entry (if the entrant expects
the established sellers to hold price uncbanqed). If one
enters below X at d 3 d 3 * the established sellers can raise
the price above P3 to P 3 . The established sellers were
operating at d l d»* but now since they operate at d 3 d 31 they
"can set the price to exclude entry at P 3 .

The deqree to which established sellers can raise the
price above the competitive level depends upon: ( 1 ) how
crowded the industry is, ( 2 ) how steep the averaqe cost
curve is and, (3) how elastic the industry demand curve is.
If the demand curve were more elastic — d 4 d 41 — then the
excluding entry price could be set as high as P 4 . If the
averaqe cost curve were steeper — shift to AC 1 — then the
excludinq price could be set at P s . If the industry were
crowded so that the established firm had shares at d 3 d 3 '
instead of d'd 11 , entry would shift the shares to the left
of d 3 d 3 * and result in a higher entry-excluding price.

An analysis of the pro-electric era indicated that
the proportion of industry capacity in the most efficient
typewriter plant was from 10 to 30 percent or 150,000 to
*150,000 units capacity per year . 3 It was also shown that

6 0

the relative unit costs rise substantially higher whan
capacity falls to between 7.5 and 5 percent of the national
market.*

Sith the leadinq typewriter companies durinq the
pre-electric era accountinq for approximately 20 percent of
the larket each, scale economies represented a relatively
substantial barrier to entry. The extent of economies of
scale as barriers to entry in the typewriter industry today
probably remains of a substantial order of magnitude.

The second barrier to entry to be considered is that
‘of absolute cost barriers.This type of barrier can arise
from four basic sources. (1) Established firms can control
superior production techniques through patents and secrecy,
(2) Imperfections can exist in the input market so that
established firms can secure inputs to their production
process at lower prices, (3) Input factors may be owned or
controlled by established firms, and (4) The established
firms may qct better rates in the capital markets.

On the basis of an analysis of the data of the late
forties, it was concluded that absolute cost advantages
•ere not very qreat.* This probably remains true today for
nanual typewriters produced in the U.S. However, in the
electric era two new elements have cmerqed to alter the
picture—the production abroad of typewriters and the
development of the electric typewriter, Uith the increase
in volume of foreiqn production to the point where the

scale advantages of American production have been
diminished, the labor cost advantaqe of the foreign
producer has become significant. Thus, there appear to be
absolute cost advantages in the production of typewriters
in foreiqn countries as compared with the nnited States.

Bith regard to the electric typewriter, there appear
to be significant absolute cost- advantages held by
International Business Kachines Corporation. This
conclusion is suggested by the data in Table III-5. This
table provides data on the location and level of employment
'in typewriter manufacturing plants in the United States.
Usinq the mid-point of the employment code classification
as the amount of employment at each location for all of the
companies except IBK (where the upper figure is used) some
rough comparisons nay be made. Accounting for
approximately one-third of the total production of
typewriters in the United States by value, IBK's
employment, in its Lexington, Kentucky plant, would be at
the most 5,000 employees. Using the middle point of the
ranqe for the other companies, their total employment would
be 17,800. Thus one-third of the industry volume by value
is being produced with approximately 22 percent of the
employmont. These relations are very gross approximations,
but with a large volume of production of electrics, it is
hiqhly probable that IBfl is able to automate, or have
performed by machine, many operations which otherwise would

TABLE III-5

T /YTATTntt AND EKPLOYMEHT AT U.S. TIPEVIRITER
MftHUFACTURING PLAIJTS*

Estimated Employees

Addressograph-Multigraph
Varl-Typer Corp.

Kevark, Hew Jersey

Employment Code C 750

Dura Corp.

Dura Business Mach in es
Madison Hts., Michigan

> Employment Code B

250

International Business Machines
Lexington, Kentucky

Employment Code B

5,000

Litton Industries, Inc.

Business Equipment Group

Royal Office Typewriter Div.
Hartford, Conn.

Bnployment Code D

2,500

Business Equipment

Royal Typer Dlv.

Hendersonville, Mo.

Employment Code B

250

Business Equipment Group

Consumer Products Dlv.

Springfield, lfc>.

Employment Code C

750

Business Equipment Group

Cole Steel Equipment Co.

Tork, Penn.

Baploynent Code D

2,500

Litton Subtotal 6 ,COO

TABLE HI-5 (continued)

Olivetti-Underwood Corp.

Hartford Conn.

Employment Code D 2,500

SCM Corporation

SCH-Smith Corona Dlv.

Cortland, N.X.

Employment Code C 750

Bulse Mfg.

Geneva, N.X.

Employment Code A 50

SCM-Sedth Corona Dlv.

« Groton, N.X.

Employment Code D 2,500

SCM-Snith Corona Dlv.

S. Cortland, N.X.

Employment Code D 2,500

SCM Subtotal 5,800

Sperry Rand Corp.

Remington Office Equipment
Elmira, N.X.

Employment Code D 2,500

TOTAL
Total

without IBM

*It la of Interest to note that the Royal Plant at Henderson, North
Carolina has been closed, as has the Underwood-Olivetti Plant In
Hartford, Conn. The Cole Steel Equipment Plant at York, Penn, and
the Kadison Heights, Michigan plant of Dura Corp. did not manu¬
facture typewriters. It is questionable whether the Vari-Typer Plant
Of Addrcssograph-Multigraph at Newark, H.J. can be regarded as a
typewriter plant. Code Key: A - under 100 employees, B - 100-499*
c - 500-999* D - 1,000 - 4,999, E - 5,000 and over.

Adapted from Fortune , 1966 Plant and Product Directory of the 1,000
largest U.S. Industrial Corporations, Vol. II, SIC 3572.

22,800

17,800

have to be performed by high cost labor.

These fiqures are intended to be mainly
impressionistic. They are estinates in that the Biddle
point of the ranqe had to be used instead of precise
employment fiqures. Furthermore, it is well known that all
of the typewriter companies, including IBH, have parts
manufactured abroad—a substantial portion of which are
used in the final assembly of typewriters, both in the U.S.
and abroad. But if this analysis does nothinq more, it
demonstrates that either IBH produces a substantial portion
•of its parts and other typewriter needs abroad, or IBB has
tremendous cost advantages and economies of scale in the
production of its electric typewriter. If the first
statement is accepted, the line of reasoning would be as
follows: It is known that a substantial portion of
production operations of other U.S. typewriter companies is
performed abroad. IBS accounts for one-third by dollar
value of the total typewriter market. Hence, it is
unlikely that IPS is able to produce all of its needs in
its one plant in Lexington, Kentucky.

It is also known that on the average, labor has
represented about 60 percent of manufacturing costs.* 0 It
has been pointed out that for parts fabrication, assembly
and labor, a sinqlo portable typewriter can take about
seven to eight hours to build, while an eleric requires
twenty-live hours. Thus one must conclude that if the

first statement was not completely correct there are cost
advantages or economies of scale in the production process.

The best published data available to verify this
point of view are that data related to the production of
the IBB Selectric Typewriter. C.F. Vouqh, the General
Banaqer of the Electric Typewriter Division of IBB, stated
in an article that the two qreatest challenges facinq
American Industry are foreign competition and the
increasing cost of production. He felt that American
^Industry must "maintain its plant and equipment at their
hiqhsst level of capability at all times. ... A strong
effort should be made to take advantage of new processes,
new materials, and each manufacturer should develop new
processes on his own".**

Hith this philosophy, new technologies were developed
and others advanced in the construction of the IBK
Selectric Typewriter. The integrated plastic molding and
electroplating for mass producing the precise printing
elements were the major developments that led to IBM’s
breakthrough in the single element typing field. Another
advancement was the U3 station Cross transfer machine which
performed 310 operations on the power frames — drilling,
reaming, tapping, boring, pressing, milling and others.
This couple* machine cost S950,000 with an additional
S130.000 for tooling and qauging.**

Another technological development which would lead to

lover production costs would be that of the elimination of
secondary operations. Ss pointed out by Leslie Hoffman,
Tool Enqineer for IBH, secondary operations are of primary
importance in the nanufacturinq of precision stampings.
The accuracy of holes is solely dependent on hole sizinq
and countersinking operations which add considerable cost
to the part. 13 He pointed out that the usual methods for
sizinq and countersinking had najor disadvantages which
were eliainated at IBK by performing piecing, hole sizinq
and countersinking operations in the same progressive die.

‘This process has resulted in significant time and dollar
savings as veil as substantial improvements in the quality
of the product. Thus the elimination of secondary
operations in high volume production is quite desirable.

Another technological innovation in the electric
typewriter was the cam lever produced at the Kingston, H.Y.
plant of I?E. The cam lever is a part that is brought into
contact with a constantly rotating rubber roll which causes
the lever to swing against a shaft that passes through a
hole not far from the midpoint of the lever. With this
motion the typebar is always actuated with the same force,
so that uniform impressions are made regardless of the
varyinq finger pressures applied. Formerly the cam lever
was all steel and had the disadvantages of being expensive
to machine. Some of the dimensions were hard to hold, wear
occurred between the "serrations and the roll", and the

noise produced was excessive. 411 of these factors led to
the development of nylon components which reduced wear,
gave lonqer life and were easily produced at a high rate
and at a low cost. Silence in operation was achieved and
no machining was required. The results were: the cost per
lever was much lower; the quality was improved; and the
life was increased.

Harold Hare, a veteran assembler at IBM, commented
that the typewriter production techniques acquired over
past years were no lonqer applicable with the IBH
‘Selectric. Though there was elimination of tine consuming
operations such as type-bar alignment', the new assembly
process required handling many more small parts. For
example, the carrier and rocker assembly which rotated and
tilted the printing head at "cobra like speeds" was
composed of some 75 minute parts.Hany more gauqes and
dial indicators were required with the new machine than
with the typebar machines.

Hany of the parts required for the IBH Selectric such
as the printing heads, which are produced by a 25 nan team,
ara produced at Lcxinqton. But it is interesting to note
that durinq the early I960's as much as 70 percent of the
required parts were purchased from other suppliers. For
the entire line of the IBH Selectric there are 2,200 part
nunbers. These facts night indicate that initial costs
would be quite high, but other techniques are utilized to

reduced overall costs.

Robot testinq of the IBH Selectric would create
additional costs, but when completed the service and
aaintenance expenses would be less. The Booverometer, a
recently developed tool used for servicinq the IBH
Selectric, would cut costs and estimated time of repair
compared to the older bulky dial indicators used on service
calls. Veiqhing just three-quarters of an ounce compared
to the 14 pound dial indicator, this tool replaces the
bulky dial and half cycle tool which cost eiqht times as
‘much money. Aqain, a cost is incurred in the development
of new technology, but it is done with lonq run cost
reduction benefits in mind.

It is apparent that a large percentage of IBH's parts
have been purchased for the Selectric, but also it is
apparent that a great effort was made to develop new
automated techniques to produce various components.
Technological innovation is a part of the qoal structure at
IBf! and reflects one of the ways of cutting overall
production costs and achicvinq cost advantages over other
firms.

From this data one may conclude that although
absolute cost advantages did not exist durinq the 1930*3 or
1940*s, it is quite apparent that in today's industry, with
IBH as the industry leader, absolute cost advantages as a
barrier to entry do in fact exist.

A third barrier to coapetition to be discussed is
that of product differentiation. Product differentiation
is the factor that differentiates a honoqenous industry
(where all the products are sinilar) and a heterqenous
industry (where basically the products are the sane—such
as typewriters—but a qreat deal of enerqy has been
expended to differentiate the product.)

Product differentiation arises fron several sources.
They are: (1) The narketinq and service orqanization that
is available; (2) The deqree of advertisinq utilized; and
*{3) The role of patents.

Probably the critical inqredients to the success of
any durable product, if it is close to that of competitors
in terns of a price-perfornance trade-off, are the
■arketinq orqanization and the availability of a service
orqanization to provide prompt and effective repairs. In
the typewriter industry the narketinq and service
orqanization is an important forn of product
differentiation. Products are distinquished and repeat
sales are achieved on the basis of the product's reputation
and acceptance. Product reputation and acceptance are
based on four important characteristics of the product.
These are: (1)product perfornance, (2) the annual
Maintenance costs, (3) the quality, availability, and
promptness of repair service, and (4) the distribution and
effectiveness of narketinq and service orqanizations.

Unlike some consumer products, for which product
differentiation nay be based on style or differences
created and sustained in the mind of the consumer throuqh
advertisinq, product differentiation for typewriters
fundamentally depends upon other factors. These other
factors are elements of performance with the four major
dimensions indicated above.

while advertisinq is present, its role is of a
relatively small order of maqnitude. Advertisinq without a
stronq marketinq and service organization would ba
"relatively ineffective.

Durinq the pre-electric era product differentiation
represented a substantial barrier to entry on a par with
scale economies. With the recent development of the
electric typewriter and with fundamental desiqn changes
this barrier to entry is today as great as it was durinq
the 1930‘s and 1940*5. This is exemplified when looking at
tho role patents play in today's market. Durinq the 1930*3
and 1940•s product differentiation was significant but the
basic product patents had expired and the differentiation
consisted in desiqn or special "selling features" which
were protected by patents. 15 With the advent of tho
electric typewriter the change in the importance of patents
was qreat and consisted of two important elements. First,
the chanqe in the role of patents for the electrics relates
to basic product operating characteristics. Attempts by

sobs of the typewriter companies, which had a tradition of
manual nachines, to develop an electric typewriter ware
incomplete. Some of these coapanies simply added a motor
and related aechanisa to convert their basic manual
machines into an electric. Bat the emphasis in the
constrnotion of the two aachines is fundamentally
different. Because the motor power-in the manual is the
effort produced by the operator, the emphasis in the
construction of the aachine is a minimum of friction to
facilitate ease of movement of all the parts. On the other
*hand, in the electric, the motor power is supplied from the
outside. The emphasis in the fundamental construction is
the ability of the machine to withstand the qreater jarcinq
and thrust involved in the electric operation. As a
consequence, the patents are of fundamental importance to
the construction of the electric typewriter.

In movinq from a manual typewriter to an electric
typewriter, another aspect of patents becomes of qreat
siqnificance. The basic desiqn of the manual had been
established and unchanqed for about a fifty year period.
In movinq throuqh various desiqns and models of the manual
typewriter, product variations could be readily imitated by
one typewriter company followinq the lead of another. But
the* shift to an electric typewriter involved some
fundamental new principles. The desiqn, cnqincorinq, and
production methods involved fundamentally distinct and

7 *

different concepts. This moved the design and production
process to the stage where patent and licensing
arrangements took on a new significance.

If a company were to buy the rights to the IBS
patents on the electric typewriter and enter into a
contract to pay a license fee for their production, their
problems would have only begun. In the electro-mechanical
and electronic fields, a patent represents not much more
than the right of the engineering and research development
departments of a company to begin efforts to "reverse
‘engineer" the product. Patents do not provide
specfications reguired for quidance of applications
engineers, nor for establishing production methods and
production operations. Larqe outlays are required; a
relatively lonq qestation period or passage of time,
considerable trial and error and substantial risk, as well
as expenses of buyinq the patent riqhts and paying license
fees before production could produce items on a competitive
cost and price basis are also necessary. Thus, not just
the patents, but the new technology of the larqest and
fastest qrowinq segment of the typewriter market represents
substantial barriers to entry tor a firm which has not
mastered the intricate technology of the electric
typewriter.

The fourth barrier to entry to bo discussed herein is
the capital requirements barrier. In an industry in which

there are heavy fixed costs relating to the use of plant
and equipment and large marketing and distribution expense,
a fire new to the area would require a substantial outlay
of capital. For »any this could be an insurmountable
barrier to entry.

Prior to 1960, which would include the pre-electric
as well as part of the electric era, there was absolutely
no data available on which to draw any conclusions
reqardinq the naqnitude of this barrier in relation to the
typewriter industry. However the recent experience of
*Olivetti*s purchase of Underwood has provided a good deal
of insiqht into this particular barrier to entry. In an
attempt to make the Onderwood company a viable and
continuing participant in the typewriter business. Fortune
Bagazine has indicated that Olivetti spent approximately
J100 million. It has been estimated that "it costs up to
$5 million lust to tool up for a new model, and up to S2
million for model refinements." 16 This only refers to
varying a model of the manual typewriter.

Thus the data available indicate that all four of the
above discussed factors represent entry barriers into the
industry or a malor and increasing order of magnitude.
This leaves one final aspect of the typewriter industry to
be considered: the relationship between a market structure
of oligopoly and market performance.

E. Prof it Performance- Over Tine

Economic theory suqqests that several relationships
can exist betveen market structure and market perfornance.
If an industry is a highly concentrated oligopoly with
blocked entry, there is the possibility that large output
restriction will exist with excess profits coninq from
potential collusion. If this is also accompanied by
product differentiation, one would expect to find product
variations and a high level of sellinq costs which would
‘result from intra-industry competition and the desire among
existinq firms to maintain the barriers to entry.

If the industry is highly concentrated, but with
moderate entry, the above observations would hold except
that the price charqed would be below that which induces
entry in order to avoid aarket sharinq. And finally if the
industry is heavily concentrated but with easy entry, there
is no price to forestall entry. Trice will probably be
increased, inducinq entry and thus chanqinq the industry's
concentration. Accompanying this would be unstable
markets, unstable prices and "periodic wastes of redundant
capacity ." 1r

It has already been established that the typewriter
industry is a hiqhly concentrated industry and that the
barriers to entry are indeed of considerable magnitude.
Formally stated the second hypothesis to be tested herein

is that with a high degree of concentration and a hiqh
level of barriers to entry, the typewriter industry would
have output restrictions with excess profits possibly
coainq from collusion.

To test this hypothesis data were collected on the
profit oarqins for the four magor typewriter manufacturers
froa 1925 up to the tine that they merqed into conglomerate
organizations. The profit margins were calculated for five
year intervals with an industry averaqe also included.
Table 1II-6 is a summary of profit rates on equity (after
‘income taxes) for the four dominant firms in the typewriter
industry during the years in which they were mainly engaged
in typewriter production. The data for two time
segments—1936-1940 and 1947-1951—were initally developed
by Professor Bain.

Profit marqins for the period 1936-1940 averaqed
about 16 percent on net worth and for the period 1947-1951,
about 18 percent. Shortly thereafter, however, the picture
began to chanqe fundamentally. vhile concentration
continued to be hiqh and, as conventionally measured,
increased subsequent to 1951, profit marqins seriously
deteriorated. For the first five year period following
1951, the averaqe profit marqin for the firms declined to
less than half the level it had achieved in the previous
five year periods. Indeed, Underwood suffered a sliqht
loss tor the period as a whole. Remington Rand’s profit

TABLE III-6

PROFIT RATE ON E<3UITY (AFTER INCOME TAXES) FOR THE
FOUR DOMINANT FIRMS IN THE TYPEWRITER INDUSTRY

1921-25

1930-34

1932-36

1936-UO

191*7-51

l4.8^ d)

1957-61

1962-66

Renin gton-Rand

2.8

11.3

1*9 ,

•3

15.5

22.7

—

Royal

7.7^

7-4

1.5

9.1

23-9

21.7

11.5

2.7

4.4(e)

Underwood

9.6 {a)

6.2

8.4

14.6

14.4

( .4)

(58.6)

...

L.C. Smith

N.A.

8-5 (c >

(I*.6)

8.9

13.0

6.8

, X W

7 .8< h >

Average

(unweighted)

6.7

8.7

1.0

4.5

15-7

18.0

8.2

1.4 W

0 a

6.1

(l8.6) (s >

(«)

1923-1925

1924-1925

(c)

1927-1929

(d)

1952-1955

(e)

1962-1964

Without Undexvood

(8)

Includes Underwood

For SCM Corporation

Source: (1936-40, 1947-51) Bain, Jo® S., Barrier® to Nev Competition (Cambridge: Harvard University
Press, 1956) p. 192. " ' —-.™ -

All other years, Moody's Industrial Survey

■arqins held up fairly well, but those of the Royal

Typewriter Company and L.C. Smith deteriorated

substantially.

The data for the next two five year periods requires
some interpretation. The formation of Sperry Rand in 1955

made it appropriate to eliminate Remington Rand as

primarily a typewriter and office machine company. Royal
continued as a separate company during the period

1957-1961, but its profit ratio declined to almost zero, as
was the case with L.C. Smith before its nerqer with

'flarchant in 1958. The 1957-1961 period for Underwood was
total disaster. On the averaqe, Underwood lost 58.6

percent of its averaqe net worth durinq the period. This
is an understatement because in the last several years of
the period, Underwood suffered losses exceedinq its total
net worth. This necessitated a restatement of debt claims
on the company so that additional equity could be created
in order to have a net equity balance before its

acquisition by the Olivetti Company.

Without Underwood, the profitability of the remaininq
three companies durinq the period 1957-1961 was 1.4 percent
on net worth. Includinq Underwood, the averaqe
profitability was a loss of 18.6 percent on net worth.
Obviously with such larqe loss fiqures, the precise
profitability or precise loss measures are not meaninqful.
Nevertheless, the picture is clear. Profitability had been

destroyed. For the regaining two. companies during portions
of the 1962-1966 period, averaqe profitability was restored
somewhat with the recovery of the SCK Corporation. The
substantial number of acquisitions by SCK durinq the
period, however, distorts its financial fiqures as
representative of the typewriter business.

The profit data are appropriate and highly
significant fiqures for conpleting this chapter on the
economic framework of the typewriter industry. Hany of the
structural characteristics of the industry were unchanged
•subsequent to 1951. nevertheless, profitability
disappeared. It is important to note that the hypothesis
developed herein is not valid when the industry is analyzed
throuqh 1968. Hiqh seller concentration and high barriers
to entry which would lead to excess profits and possible
collusion was the hypothesis that best fit the typewriter
industry, and it was partially substantiated by the profit
data from 19.16 to 1951. Since 1951, the industry has been
characterized as one with hiqh seller concentration and
high barriers to entry, but not with excess profits. In
fact, over a substantial number of those years,
considerable losses were incurred as evidenced by the
profit data in Table III-6.

Previously it was mentioned that product
differentiation was of a considerable magnitude in the
typewriter industry and that the most important elements of

product differentiation were the aarketing, distribution
and service organization. Because of their iaportance the
next chapter will analyze these factors in depth.

footno tes to chapter iit

1. Industry Profiles, 1958-1965 (Vashinqton: 0.S.

Government Printing Office, B. D. S. A., 1966) p. 105.

2. See Joe S. Bain, Barr iers to New Competition
(Cambridge: Massachusetts: Harvard Oniversity Press, 1956)

and bis Industrial Organization (Sew fork: John Viley &
Sons, Inc., 1959 and 1968 Second Edition).

3. Barriers to Sew Compet i tion , op. cit., p. 285.

4. Ibid.. p. 3.

5. Industrial O rganizatio n. op. cit .. p. 154.

6. Barriers to Bow Compet i tion . op . cit., p. 107.

7. Ibid-. P- 72.

6* IM4-# P- 249.

- 9- iMd-. P- 144.

10. "Modernizing Fever Hits Typewriter Plants", Bus iness
Keek (March 18, 1961) p. 130.

11. C. F. Vouqh, "Competition and Rising Production Costs,"
.El2!?!!Sii2!l« (teceatcr 1961) p. 64.

12. Craffey, J.J., editor, IP1 Sclectric Typewriter, A
special report to ET Employees (New York: II’.R Corporation,

July 31, 1961) p. 12.

13. Leslie Hoffman, "Elininatinq Secondary Operations",
IhC Tool £ Panu fact ur o Engineer. (August 1960) p. 35.

14. Craffey, J.J. , loc. cit.. p. 22.

15. Barriers to Sea Competition , op . cit.. p. 285.

16. Bus iness Weet, op. cit., p. 127.

17.Industrial Organization, op. cit., p. 35.

CHAPTEH IT

THE BASKETING, DISTRIBUTION AND SERVICE
ORGANIZATION IN THE TYPEWRITER INDUSTRY

In the sale of a durable good of relatively high unit
value, five factors are important in determining the market
success of a product. These are:

1. An effective aarketing organization

2. An effective service organization

3. Low maintenance costs

4 . Perfornance of that product

5. Price of the product

This chapter focuses on the distribution system of
typewriter companies. The distribution system is defined
to consist of the marketing and service organization. The
chapter takes the product and its characteristics as given
and focuses on the role of the distribution system in
deternining the effectiveness of a company's performance in
the aarket place.

The distribution systea for typewriters has been
described as follows:

Typewriters are sold through aanufacturers*
branch sales offices, retail dealers, and
consignment outlets. About 45 percent of
domestically produced standard manual typewriters
are sold through manufacturer's branch sales
offices, 10 percent throuqh retail dealers, and
35 percent through consignment outlets. 85
percent of all standard electrics are sold

through manufacturers* branch sales offices and
about 10 percent throuqh consignment outlets.
Portables (manual and electric), on the other
hand, are sold almost entirely throuqh retail
dealers and increasingly throuqh volume
retailers, such as department stores, discount
houses, and credit jewelers. 1

The basic channels of the distribution pattern for
typewriters can be summarized in the following diagram.

II £2 gntlet

Standard Branches and direct

Typewriters salesman; exclusive

agents

Detail dealers, especially
volume retailers such as
discount stores, department
stores, and credit jewelers

The interaction between product marketing and service
is mutual and reinforcing. » qood product enables a firm
to develop a strong marketing organization and provides
financing for a strong service organization. Service
expense on a qood product in turn will be relatively
minimal if it is dosigned and manufactured soundly in the

Portable

Typewriters

first place. This generalization was reflected in the
analysis of the distribution structure. The doninant
position of IBH is very clear. It has a total of 2,250
direct salesmen, compared with under 1100 for all of the
other companies combined.* Hith respect to its service
organization IBH's position is even lore commanding. It
has a total of 4,330 servicemen. This compares with a
total of 2,448 for all of the other companies combined. 3
Expressing these fiqures in percents, IBI1 with a 33.6
percent share of the the typewriter market has 48.9 percent
,of the industry’s salesmen and 56.5 percent of the
industry's servicemen. This would indicate that IBM has a
much greater density factory in terms of sales and service
than the other typewriter manufacturers. The advantages of
a hiqh density factor are discussed in the next section.

Thus there is an interacting relationship between the
service organization and the effectiveness of the marketing
and distribution system. k product which has a low
•aintenance expense to start with and which involves a
minimum of servicing tine and expense provides the kind of
performance that enables it to develop an iaaqe which
constitutes an increasing barrier to entry.

. *• Reinfo rcem ent of narkcting and Service Organizations

Vhen this kind of combined advantage is reinforced by

8 i

the availability of a service organization which promptly
and on the customer’s premises performs both preventive
maintenance and restores units to operations, marketing
effectiveness is reinforced to a high degree. Hith a
product with minimal maintenance expenses, service
contracts can be sold on very attractive terns. This also
keeps the resale value of the unit relatively high. Thus
the initial product can be sold at a price higher than the
prices of competing products yet the total cost of using
the item can be shown to be significantly lower despite
.substantially higher initial cost.

This last point is exemplified by looking at today’s
market. In terms of a price comparison on comparable lines
of office electric typewriters, IBH leads the field with
Boyal a close second. However IBH which has the highest
price line of typewriters also has the largest share of the
office electric market — approximately 60 percent. This
would indicate that the initial purchase price is not
always the most important factor in the purchase of
electric typewriters. Factors such as a strong product —
infrequent breakdowns —, a rapid and effective service
organization, and the ability to provide needed maintenance
at a low cost provides IBH with a product that has a higher
initial cost but undoubtedly a lower total cost compared to
the other manufacturers. This has resulted in IBH's
dominance of both the office electric typewriter market and

the total typewriter market.

The reinforcing effects are fnrther magnified in a
nowher of other ways. The aarket share of a successful
coopany is large and continues to increase. The larga
Market share provides the company with a customer density
for holding down both its Marketing and its service costs.
In addition, with a high density of both sales and the
stock of Machines in use, the coapany can concentrate its
Marketing efforts in snaller geographical segments. By
being able to sell service contracts on a relatively
.inexpensive basis the serviceman can call upon the customer
and if trained appropriately he can perform a considerable
positive Marketing effort during these frequent contacts.
This also aakes it possible for such a company to achieve
coaprehensive Market coverage. By reducing the area of its
salesmen and the qeographic area of responsibility of
coverage of its servicemen it becomes increasingly
profitable for the company to handle small accounts. The
incentives work with converging effect. Because the
salesman's territory is smaller he must give attention to
the smaller accounts to maintain his volume. Because the
area he covers is smaller, the time involved in making
these additional contacts is shorter and therefore can be
profitable, hll of this is reinforced by the image of a
successful product and the actual effective perfornance.

What is significant here is that the reinforcement of

a good product by the growing strength of a marketing and
service organization not only increases the barriers to
entry of a potential new firs, but makes it increasingly
difficult for other firms to aaintain their position in the
industry. Thus one has a clear illustration of market
processes that tend toward creation of a dominant firm in a
aarket structure of existing partial monopoly, virtual
complete market control in an economic'sense. The economic
and business advantages of the dominant firn become so
great that the ability of competing firms or potential new
'entrants to obtain a share of the market is substantially
reduced. These factors help reinforce the degree of
concentration that exists in the typewriter industry today.

The reinforcement operates in the opposite direction
for the smaller firms. The success of the product of the
dominant fira is reinforced by the strength of its
Marketing and service organization. It becomes difficult
to aaintain salesaen and servicemen in firms whose market
shares are small and declining. The coepensation to
salesmen and servicemen in the dominant firms makes the
productivity of the salesaen and servicemen substantially
kiqher than their counter parts in the less successful
firms. Therefore, the marketing and service organizations
of the less successful firms progressively deteriorate.
Thus any product advantage of the more successful fira is
reinforced by significant advantages in the resulting

marketing and service organization. These market processes
illumine and reemphasize some of the judgements made about
the typewriter industry during the pre-electric era. 4

The Olivetti-Underwood experience is a prime example
of what can happen to a company's sales and distribution
system when their market position deteriorates.Olivetti had
purchased Underwood for the reasons discussed in the next
section. But what they found was a decaying marketing and
distribution system which was the direct result of a
decaying market position in the typewriter industry.

In the years prior to 1962, competition had displaced
Underwood products in many offices of the larger
corporations in the United States. Thus after the purchase
br Olivetti, the whole Underwood organization had to be
revamped. In 1961 there were 2,000 large corporations
selected for special attention. Experienced salesmen of
Underwood and Olivetti products approached these national
accounts in special sales efforts. In addition special
national account business shows were presented in 30 major
cities throughout the United States.* The purpose of the
concentrated sales program was to prove the usefulness of
Olivetti-Undervood products to these large corporations and
from there expand to the rest of the nation using the 2,000
corporations as a testimonial. Underwood has been
successful in this approach.

The rest of the marketing and distribution

8 9

organization was also drastically altered. The sales
efforts of calculators and typewriters were combined. At
the beginning of 1962 branch operations were staffed with
new nen with little experience in the sale of Olivetti or
Underwood products. Branch operations were established in
125 of the largest cities in the United States. Prior to
1962, the branch manager's duties were split between
nanaqing the sales for his branch and aanaging the sales
for various agents. This was chanqed so that the agents
had direct contact with the home office. In addition, all
other functions except sales were removed from the hands of
the branch manager.

The aqency division was established with 1100
positions to be filled. Of those hired, 50 percent were
former Underwood or Olivetti agents or dealers. Each agent
would have exclusive rights to the Underwood-Olivetti
products. 6

Thus Olivetti, which originally purchased Underwood
for its marketing and distribution system had to invest a
larqe sum of money to completely revise that system. This
was partially the result of a deterioration in the
marketing and distribution system at Underwood.

B. JSaxkeiing ffoblems facLng a Pgrejga «anu£actu£e£

The situation of foreign manufacture in the

typewriter industry as a potential entrant is of special
interest in Tie* of the characteristics of the distribution
system in the typewriter industry. The foreign producer
faces a significant strategic policy question as he
contemplates attempting to enter the U.S. market. One
alternative that will contribute to his long term success
is the development of his own marketing organization. The
cost of developing his own marketing organization through
his own branches and direct sales and service organization
is indeed substantial. As indicated before, if a
manufacturer seeks national coverage, not only are the
expenses of establishing a marketing organization large,
but subsequent operating costs would represent a continuous
heavy burden. The reason for this is that if a firm
develops a national organization initially, the density
factor in terms of volume per branch or individual salesman
is so small that these direct costs charged against unit
sales bear a much higher percentage of the sales dollar
than would be the case for an existing manufacturer with
already large volume.

An indication of the magnitude of these costs is
suggested by Olivetti's experience with Underwood. A
stronq motivation on the part of Olivetti for developing a
relationship with Underwood was to utilize its larqa
■arketinq organization in the United States. It wa3 hoped
that this would provide a basis for a stronq entry of

Olivetti prodacts into the United States. Yet, in

attempting to deal with the problems which Underwood faced,
»>y the end of 1962 Olivetti had invested some $60-65
■illion seekinq to rehabilitate Underwood's sales
organization. 7 Thus the one strategy of developing its own
direct sales organization involved a very large outlay of
capital. If the Olivetti-Underwood experience is any

guide, the outlay of capital would have to be in the range
of $75 - 100 million for establishing the framework of a

sales organization. This does not cover the annual
^operating losses that would result from the incomplete
utilization of such a large organization. Hence, a firm
■ust consider the other alternative.

The other alternative for the foreign manufacturer
seeking an entry into the U.S. domestic market is to
utilize the established independent dealers for standard
typewriters and to use the mass marketing outlets for
portables. This indicates why the foreign firms have been
uuch aore successful in penetrating the portable market
than the standard aarket, particularly the standard
olectric aarket. The portables, particularly the low price
line, can be sold to discount houses, department stores and
other aass retail merchandising outlets. k minimal
marketing organization owned and controlled by the
manufacturing company is required.

On the other hand the distribution systen for

standard typewriters, electric or manual, is much
different, is indicated, the dominant method of selling
the standard typewriters is through the coapany*s own sales
organization, consisting of branches and direct salesaen.
Indeed, approximately 80-90 percent of standard typewriters
are sold through this system. 8 Thus the independent dealer
accounts for about 10-20 percent of this market. The
fundanental handicap faced by the independent dealer is
that his operation is basically local in its nature. It
cowers a United area within a city or, if the independent
,dealer has a strong delivery organization bached up by
substantial advertising, it nay cover an entire
■etropolitan area. The big volume of sales is made to
national organizations with locations throughout the United
States. In order to effectively sell and service such an
account, a national marketing and servicing organization
under the control of the nanufacturer is essential.

Thus for a given foreign country which seeks to nake
a penetration into the U.S. market, the choice of the
second strategy of using independent dealers imposes a
limited share of the market in advance. Since independent
dealers as a whole account for only 10-20 percent of the
standard typewriter market it is clear that a given foreign
manufacturer will be unable to obtain the effective
services of all of the independent dealers. In addition,
the dealers sell a number of lines a3 well. Thus if a

given foreign nanafacturer obtains as high a proportion as
50 percent of the dealers, and obtains 25 percent on the
average of their volume, the market share of the typewriter
field that would be achieved by that foreign company would
be at nost one-half times one fourth of 20 percent or 2.5
percent of the total market. Adler Typewriter Company of
Germany is a good example of this situation. Having
achieved 2.5 percent of the O.S. market through the use of
independent dealers, the company has reached about the
maximum market share under this type of marketing system.

However, developing a good relationship with a group
of independent dealers may pose problems for the
development of the sales of the foreign manufacturers*
portable typewriters. To develop a relationship with
dealers generally requires that the dealers receive
exclusive rights to sell the foreign manufacturer's total
line of products in a given local area. But the effective
marketing channel for the relatively small unit value of
portable typewriters is the mass retailer aarket consisting
of nail order houses, other types of department stores and
discount houses. Dealers are an ineffective outlet for the
foreiqn manufacturer's portables, but if he attempts to
market his standard typewriters through the independent
dealers and his portables through the mass merchandising
retailers, he will incur the ill-will of the dealers and
cause a deterioration in the effectiveness of the dealer

organization for handling the sales of bis standard

typewriters.

One exception is with Olivetti-Underwood where the
portable line of products are sold to 4,000 outlets in
addition to the branch and agency organization. When the
products are sold to dealers, they are sold on a
non-exclusive basis. But again, this nay show the
advantage of a foreign nanufacturer acquiring a domestic
producer such as Ondervood.

Thus for analysis of the economic processes and the
^nature of competition in the typewriter market, the
marketing and service organization seem to be of critical
significance. They interact with the product performance,
with its level of maintenance costs. Any advantage in
quality of products measured by performance or the low
level of maintenance costs is reinforced by the
effectiveness of the marketing and servicing organization.
Thus any large difference in market share in the present
typewriter industry is likely to be reinforced and lead
cumulatively in the direction of increased market dominance
by a single firm.

C. Changes ifi tfce-Typewriter Ind ustry

The situation described is more applicable to the
characteristics of the typewriter market today than in the

decades when the manual typewriter predominated. In that
era, ther were no fundamental differences between the
manual typewriters and as a consequence the market shares
of the dominant biq four firms were rouqhly equal. This
enabled each firm to achieve the desired economies of
scale. The product differentiation emphasis on different
elements of desiqn and appearance was reinforced by
advertisinq. The related marketing and service
organizations of the four major companies were of about
egual strength. If one typewriter company moved ahead in
.terms of a particular desiqn or feature which provided it
with an advantage, the advantage was likely to prove
temporary. It was followed quickly by imitation of success
by the rival companies. As a consequence, the biq four
companies maintained rouqhly equal market shares, while it
was difficult for other companies, including the foreiqn
manufacturers, to enter the market.

A fundamental trend which took place at this time was
the broadeninq acceptance of IBH standard electric
typewriter. The sales of manual typewriters began to
decline. In the standard typewriter field particularly the
traditional American typewriter companies had lagged in
introducing an effective electric typewriter. Attempts had
been made to introduce electric typewriters, but they were
not successful until IBS made a successful market
penetration. However, with the increased penetration by

both foreign manufacture and by IBB with its electric
typewriter, the nature of the economic processes in the
industry have fundamentally changed.

With regard to the IBB electric typewriter, the
ability to iaitate this type of product involves huge
capital outlays with qreat uncertainties. The tiae lag
gives an advantage of developing a Marketing and servicing
organization so strong as to aake the probability of
success for a competing product by one of the existing old
line American typewriter manufacturing companies relatively
t small. These prospects narrow the range of viability of
domestic manufacturing activity. Instead of a tendency
toward relatively egual market shares as existed
pre-effective foreiqn competition and pre-lBH electric, the
tendency now is for any market share advantage to be
self-reinforcinq and tend toward the emergence of a single
dominant firm in a given line of business. Any comparative
advantage through marketing organization and product image
which may have been possessed by the original American
manufacturers of typewriters has either been destroyed or
is being subject to very rapid erosion.

The major problems facing a foreign manufacturer
seeking to penetrate the American market prevents any
individual foreiqn manufacturer form obtaining a
substantial share of the D.S. market. The limited success
of foreign manufacturers is related to particular segments

of the aanual typewriter market. In addition, the types of
Marketing strategies that have to be employed in order to
carte ont segaents of the market east be analyzed in
soaevhat qreater detail in order to understand the role of
foreiqn competition in the U.S. typewriter market. A more
detailed explanation of that role and its nature is
therefore the subject of the following chapter on the
impact of foreiqn competition.

FOOTNOTES TO CHAPTER IV

1. United Sta tes Typewriter Industry, Analysis and
Trends, 1958-1966 . (Washinqton, D.C.: United States

Department of Commerce / Business S Defense Services
Administration, July 1967) p. 1.

2. Testimony before the FTC in the application of Litton
Industries to nerqe with Triumph-Adler of Germany, April

10, 1969.

3. Ibi d.

, 4. See Barr iers to Competition . "The primary basis of
differentiation seems to lie in product reputations and
particularly in customer service (involvinq repair,
■aintenance, inspection, etc.) built around established
chains of dealers." p. 285

5. Olivetti-Onderwood. An nual Report . 1962.

6. JMi.

7. "Onderwood Fiqhts Its Way Back," Business Week.
December 30, 1962, pp. 42.

8. SBited-States Typewriter Industry. Anal ysis and Trends.
1956-1 966. (Washinqton, D.C.: United States Department of
Commerce/ Business C Defense Services Administration, July

1967) p. 1.

CHAPTER T

TEE IHPACT OF FOREIGH COMPETITION OH
THE O.S. TYPEWRITER I5D0STBY

The iapact of foreiqn cospetition has been varied in
its nature and not uni-dinensional - in its impact. The
nature and iapact of the several aspects of foraiqn
competition will be analyzed under the followinq topics:

A. Tariff history

B. Data trends

C. Hanufacturinq abroad by D.S. companies

D. Cost cooparisons

E. Market share considerations

A. Brief Resume of Tariff History

In the Tariff Act of 1909 a 30 percent ad valorem
tariff vas applied to the importation of typewriters in the
United States.* In the revision of the tariff under the
Tariff Act of 1913 typewriters were placed on the free list
3 and the Tariff Act of 1930, * typewriters remained on the
free list.

In the late 1990's extended discussions between the
United States and other countries took place in scekinq to
liberalize tariff policies and seekinq a qeneral reduction

100

in tariffs. The duty-free status of typewriter inports
into the United States became fully "bound" by the General
Agreement on Tariffs and Trade (GATT) effective on June

6 . 1951.

The contrast in tariffs on D.S. exports of
typewriters into foreign countries has generally remained.
The tariffs on the import of U.S. typewriters into European
Connon Earket countries would average in the ranqe of a
10.h percent ad valorem tariff. Thus a lack of symmetry
developed in the tariff arrangements on typewriters between
'the U.S. and other countries.

The impact of changing the tariff status of imports
of typewriters and parts into the United states to the
United States by the General Agreement on Tariff and Trade,
effective June 6,1951, introduced greater certainty in
planning for foreign manufacturers. Outlays for the
development of organizations to export typewriters into the
United States could be based on a greater certainty that
the tariff status of typewriters would not bo changed in a
short period of time. It provided the foreign
manufacturers with a basis for expectation of a sustained
period of time in which the use of distribution and
marketing organizations would receive a return.

This change was taken in conjunction with other
developments in European production. After World War II
typewriter plants in both Vest Germany and Italy were

101

rebuilt with facilities with the latest and Best modern
technology.

Rith the advent of the common market development in
Europe and the achievement of larger economic units,
European companies beqan to operate in enlarqed markets.
This provided the European companies with two advantages.
One was that the European companies had always emphasized
technical advance with the purpose of carving out
proprietory seqnents of relatively small markets. The
economics of the type of industry in which they operated
•placed great pressures on effective research and
development organizations. This was coupled with the
second advantage of lower waqe costs. With the development
of larqer economic markets the foreign manufacturer was
able to enlarqe his scale of operations and reach volumes
which enabled the foreiqn manufacturer to compete more
equally on a product cost and price basis in the U.S.
market.

E. Irends ifl World Tr ade ij] T ype writers

The impact of the foroqoinq economic developments was
substantial. It may best be measured by an analysis of
patterns of U.S. imports to U.S. exports of typewriters.
This is best portrayed by the data of Fiqure V-1. The
figure sets forth the ratio of the U.S. portion of imports

102

FIGURE Y-l

103

FIGURE V-l
(Continued)

Source: These data were developed from the two foreign
trade series published by the U.S. Department
of Commerce. FT 135 is for U.S. imports. FT 410
is for U.S. exports. (Washington; D.C.: U.S.
Department of Commerce, Bureau of the Census)
monthly publications 1948 through December 1967.

lo4

to exports of typewriters for the period 1948-1967. The
data used in the construction of this figure is presented
in the Appendix.Inports into the United States in 1948
represented 4 percent of U.S. exports of typewriters and
parts. However, by 1966 the ratio had risen to 176 percent.

The change is even more dramatic when analyzed into
typewriter parts versus complete typewriters. For
typewriter parts the ratio rose from less than 1 percent to
5 percent by the early 1950's after which it remained
relatively stable at that level. However, for complete
typewriters the ratio of imports to exports which was as
low as 4 percent in 1948 rose to 296 percent by 1966.

Before World War II the U.S. dominated foreign trade
in typewriters, accounting for as much as 65 percent of the
vorld market. World War II disrupted trade, including that
of typewriters. However, by the late 1940's the United
States had regained its lost markets. Between 1948 and
1957, the U.S. share of the world market declined from
approximately 63 percent to 9 percent. In the last decade,
the U.S. share of the world trade in typewriters has
fluctuated in the range of around 10 percent. 5

It may be noted, however, that exports of typewriters
and parts increased in absolute terms between 1950 and
1966. Exports of typewriters and parts increased from $15
million in 1958 to $34 million in 1966. The export of
specialized and electric typewriters accounted for

103

approximately half of the increase. But even more dramatic
was the increase in the export of typewriter parts
reflecting the qrowinq practice of producing typewriters in
U.S. subsidaries overseas. Exports of typewriter parts
grew from S7 Billion in 1958 to $14 willion in 1966.

Bhile the exports of typewriters and parts increased
in absolute teres, the imports of typewriters and parts
increased even tore qreatly, resulting in the rising ratios
of imports and exports as set forth in Figure V-1.

Table V-1 indicates that in recent years U.S. net
'production, defined as U.S. production less exports, was
approximately 85 percent of U.S. consumption.If U.S.
production, without deducting exports, is related to U.S.
consumption, the relationship rises to almost 95 percent.
But these figures understate the impact of foreiqn
competition on the U.S. typewriter industry. This is
because the great impact on the trends referred to above
has been on the shift of the manufacturing of a large
number of typewriter lines by all U.S. companies to plants
overseas — mainly in western European countries.

nevertheless, with U.S. production such a high
percentage of U.S. consunption, the question may be raised
as to whether the impact has been sufficiently great to
cause the concern which has frequently been expressed. The
impact has been qreat for the following reasons: First, the
impact of increased imports from foreign manufacturers has

106

U.S. POSITION IN W3RID PRODUCTION OP TYPEWRITERS, 1965 , 1966
(Dollar Amounts In Thousands)

Tear

Consumption

(a)

Net Production

(b)

Percent of

U.S. Net Pro¬
duction to U.S.
Consirrption

Percent of

U.S. Gross
Production to
U.S. Consumption

1967 '

$510,888

$448,963

87.9

95.2

1966

448,836

387,562

86.7

94.3

1965

334,270

286,780

85.8

95.0

(a) Consumption is defined as total U.S Production (Including parts) plus total U.S.
Imports less U.S. exports.

(b) Net Production Is total production less U.S. exports.

Source: FT 135 reports for U.S. Imports. FT 410 reports for U.S. exports. (Washington, D.C.t
U.S. Department of Commerce, Bureau of the Census) monthly publications.

Facts for Industry, Series M35C (Washington, D.C.: U.S, Department of Commerce: Bureau of
the Census) monthly publications.

essentially removed an important element of qrovth in the
domestic manufacture of typewriters. Second, it came at a
time when the growth element in manual typewriters was
already removed by the development of electric typewriters
so that in individual manufacturing plants for manual
typewriters in the O.S. downward trends in absolute terms
developed. Third, in the low-price portable seqment of the
market particularly, the share of the foreiqn producers has
been very substantial. Fourth, these trends have been
sufficient to result in excess capacity in a large number
"of the manufacturers* plants of domestic producers. As a
consequence, capacity utilization has dropped to the range
of 55-65 percent for domestic manufacturers. Such a
decline in capacity has been sufficient to wipe out
favorable profit marqins and result in substantial losses
for domestic manufacturers.

C. Man ufacturing Operat ion s Abroad by Typewriter

Comp anies

One of the naior influences on the world development
of the typewriter industry was a shift of production from
the Dnitcd States to European countries. This was a major
factor in the decline of the U.S. exports of typewriters
and also in the increase of U.S. exports cf parts. Belorn
1955 typewriters were not produced in largo quantities in

108

the European countries and D.S. model typewriters were
produced in insignificant quantities. A decade later, at
the end of 1958, each of the U.S. firms which were major
producers of typewriters were conducting typewriter
production operations in one or more of the European
countries.

The impact of European production was seriously being
felt by 1960. Imports of the low-cost portables continued
to increase and absorb a larqe share of the domestic
market. Profit margins were being lowered throughout the
'typewriter industry as domestic producers tried to maintain
their position in the industry. An example of a company
trying to strengthen its position in competing with the low
cost portables was SCfi, which decided to transfer
production of the Skyriter to its subsidary in Enqland.
This move was aimed at cutting production costs and
improving their competitive position in the low-priced
portable market. 6

The situation was dramatized even more by an article
in Financial World which stated:

American typewriter markers are waging a
vigorous counter-attack on several fronts against
foreign imports. Production facilities have been
regrouped, product lines have been revamped and
sales forces reorganized, all as part of the
grand strategy. Success in this campaign could
bring a sharp earnings recovery for those U.S.
tiros that have been hit hardest by competition
from abroad. 7

109

The year 1960 was an excellent one for the typewriter
industry as far as sales were concerned. Unit volume rose
fros 1.7 million to 1.8 Billion. This matched the record
■ade in 1957 when 1.84 Billion typewriters were sold.
However, the picture was quite different on the earninqs
side. Rost firms were heavily burdened with the defense
aqainst cheap imports and their profit picture reflected
this fact. In the case of SCR and Underwood, substantial
losses were incurred. 8

Thus several conpanies were shiftinq production of
*tbeir typewriters to overseas plants. Sperry-Rand at that
tine noved all its U.S. production of non-electric office
and portable machines to Europe. The portable line was
shifted for reasons of lower production costs abroad, while
the office non-electric shift was due to decreasinq sales
in the O.S. and increasinq sales abroad. SCR and
Royal-BcBee had already shifted production of their low
priced portables from the U.S. to Europe.’

The factors brinq about this fundamental
transformation in this aspect of the international
typewriter market were varied but conpellinq. First,
production costs had qenerally been lower in Europe. This
situation has , of course, existed for somo time and
therefore some additional influences wore required to cause
the fundaBontal chanqe in the investment policy that took
place.

110

Second, this advantage of lover production cost beqan
to be increasingly felt in the U.S. Growing competition
from the European producers was experienced both in the
U.S. domestic market and in non-European markets where O.S.
firms had made a beginning and hoped to expand their volume
of sales.

Third, in 1948 the European regional economic
organization had been organized.The European Economic
Community (EEC) was established including France, West
German, Italy, Netherlands, Belgium and Luxembourg. The
'European Free Trade Association (EFTA) was also established
including the United Kingdom, Denmark, Greece, Norway,
Austria, Ireland, Sweden, Switzerland, and Spain. In
addition, in 1948, the Organization for European Economic
Cooperation ( OEEC) was established comprising 18
countries. These included Austria, Belgium, Denmark,
Prance, West Germany, Greece, Iceland, Ireland, Italy,
Luxembourg, The Netherlands, Norway, Portugal, Sweden,
Switzerland, Trieste, Turkey, and the United KinqdoD. All
of these countries subscribed to the provisions on the
General Agreement on Tariffs and Trade (GATT) and six of
the countries representing the European Coal and Steel
Community.

The establishment of reqional economic qroups in
Europe had qreat significance. It provided both
opportunities and threats. The opportunities were

111

represented by a combined population almost one-third
qreater than that of the O.S., with a qross national
product approximately equal to that of the O.S. The
tariffs and other trade requlations in foreiqn exchanqe
controls made it clear that there would be distinct
advantaqes to locatinq within these reqional groups, which
would be raisinq economic boundaries of various types.

k fourth and related factor also represented an
advantaqe of locatinq in European countries. By so doinq
the O.S. firms increased their opportunities for exportinq
'from Europe to dollar shortaqe areas of the world with
European currency credits.

Perhaps none of these influences alone could have
played the dooinant role in causinq the massive shift of
production from the O.S. to European countries. However,
taken in conlunction, their influence was overwhelainq. As
a consequence, the year 1950 represented a significant
change in the O.S. position and the international
typewriter market. For the first time the value of imports
of typewriters and parts of approximately S20 nillion,
exceeded the value of exports of typewriters and parts from
the O.S. of approximately $15 million. Parts, which had
accounted for only 9 percent of O.S. exports in 19*»8,
accounted for almost 50 percent of the total value of O.S.
exports of typewriters and parts in 1908.** The decline in
the O.S. oxports of typewriters and parts amounted to

112

approxinately $27 Billion, aluost double the $15 Billion
exports in 1958.

The extend of the inpact of the novenent of portable
typewriter nanufacturinq operations by U.S. coepanies
abroad is shown by the data in Table V-2. Bote that all of
the low-priced aodels of portable typewriters are produced
abroad.

Another aspect in the analysis of the inpact of
foreiqn competition is the quality ratinq of foreign
produced portables in relation to the portables produced by
'0.S. nanufacturers. In Chapter III it was ventioned that
outside of SCH, Remington,Royal and Olivetti-Underwood
other nanufacturers account for 17.6 percent of the D.S.
aarket. When this is related to the ratinqs of portable
typewriters by consumer report bulletins, some interesting
conclusions can be drawn. Tables V-3 and V-4 present the
ratinqs of portable typewriters by consumer report
bulletins for the years 1960 and 1966. In 1960, 26
portable typewriters were selected by Consumer Reports
Haqa 2 lne for analysis. Of these 65.3 percent were
produced outside the U.S. and 15.4 percent produced inside
the U.S. The rest were unknown in oriqin of production.
In the heavyweiqht cateqory there was no U.S. produced
nachine or U.S. nachino nanufacturcd abroad which received
an excellent ratinq. In the very qood category two out of
the throe wore produced in the U.S. And in the good

PATTERN OF LOCATION OF MANUFACTURERS OF
TYPEWRITERS ABROAD

Portable Typewriters

Model
Royal Royalite
Smith Corona Skyrlter
Hermes Rocket
Olympia SF
Olivetti Lettera 22
Remington Travel Rlter
Underwood Leader
Arrtarea Parva
Peerless

Country of Origin
The Netherlands (Tr. 122)
Great Britain (Tr. 121)
Switzerland (Tr. 120)
West Germany (Tr. 121)
Italy (Tr. 120)

Abroad (Tr. 103-104)
Abroad (Tr. 55)

Italy (Tr. 120)

Japan (Tr. 119)

(Tr. 16)

Intermediate Price Range Portable Typewriters
Diana-Royal McBee Die Netherlands

All models except: Abroad

Royal Futura 400 U.S.

Smith-Corona line U.S.

Hi flier Price I?on-electrlc Portable Typewriters

Smith-Corona Silent-Super U.S.

(since superseded by Galaxle)

Royal Futura 800 UJ3.

All other models

Abroad

TABLE V-2
(continued)

Source: The information in Table V-3 vas compiled from the tran¬
script in a Application for an Escape-Clause investigation
under Section 7 of the Trade Agreements Extension Act of 1951
as arended. The Application vas prompted by the fact that
I typevriters vere imported to the U.S. duty free, -whereas

American manufacturers faced both tariff barriers and quotas
dr other regulatory restrictions on inports into foreign
countries. The applications -were opposed to the "imposition
of any quota on the value or units of typevriters -which nay
be imported into the United States". The Tariff Commission
•was requested to re commend the imposition of a tariff on the
importation of typevriters to "compensate for the dual
advantabe of the lower manufacturing costs and tariff pro-
“ tection employed by typewriter producers in other countries.
See United States Tariff Commission, Typewriters Application
far Escape-Clause Investigation under Section 7 of the Trade
Agr e ements Extension Act of 1951 as amended, i 960 , pp. 39-**0>
P. 57-

TABLE V-3

RATINGS OF PORTABLE TYPEWRITERS, i960

15-23 lb* Model -

Price

Acceptable — Excellent

Hermes 3 000

17 lb.

$125

Switzerland

Olympia SM4

21 lb.

120

W. Germany

Acceptable — Very Good

Faclt TP1-K3

19 lb.

110

Sweden

Sears Tower President XU

19 lb.

115

U.S.A.

Smith-Corona Galaxie

17 lb.

142

U.S.A.

Acceptable — Good

Alder Prims

18 lb.

130

W. Germany

Imperial Deluxe 5

15 lb.

125

Britain

Torpedo 18b

19 lb

110

Rem.Rand (Germany)

Underwood-Olivetti Studio 44

20 lb.

120

Spain

Acceptable — Fair

Alpina Model Sk24

23 lb.

110

E. Germany

AIC Sk24

23 lb.

100

Remington Ouiet-Riter Eleven

21 lb.

138

Abroad

Royal Futura 600

18 lb.

136

U.S.A.

Wards Royal Eeritage

18 lb.

Acceptable — Poor

Consul Deluxe

20 lb.

Japan

Remington Travel-Riter

16 lb.

Abroad

8-13 lb .

Acceptable — Good

Olympia SFS

11 lb.

W. Germany

Underwood-Olivetti Letters 22

11 lb.

Italy

Hermes Rochet

8 lb.

Switzerland

116

TABLE V-3 (continued)

8-13 lb.' Model

Weight

Price '

Country of Origin

Acceptable — Flair

/AFC

13 Xb.

$ 60

Cole Steel

11 lb.

11A

Royal Royalite

10 lb.

Holland

oears Tover Chieftain HI

10 lb.

fort th -Corona Skywriter

10 lb.

Britain

Wards Royal Dart

10 lb.

Antares Domus

10 lb.

Italy

(SA) -- Data not available

Source: Consuaer Report (l.'ovenber i960) pp. 571, 572.

117

TABLE V-4

RATINGS OF PORTABLE TYPEWRITERS, 1966

Model

Weight

Price

Country of Origin

( Acceptable — Excellent

Olympia SM-9 10" carriage

21 lb.

$120

V. Germany

Olympia SM-9 13" carriage

25 lb.

140

V. Germany

Saith-Corona Classic 12

20 lb.

128

U.S.A.

Sears Forecast 12

20 lb.

114

U.S.A.

Hermes 3°0O

17 lb.

130

Switzerland

Acceptable — Very Good

Wards Signature 510

20 lb.

Japan

Wards Signature 513

21 lb.

Japan

find.th-Corona Sterling .. >

18 lb.

108

02-A.

Royal Safari

18 lb.

U.S.A.

Facit TP2

18 lb.

119

Sweden

Brother Deluxe 900

20 lb.

120(est.)

Japan

Brother Deluxe 905

21 lb.

130

Japan

Acceptable — Good

Olympia SF Deluxe

12 lb.

V. Germany

Wards Signature 44OT

15 lb.

Japan

Olivetti-Underwood Studio 44

' 21 lb.

100

Spain

Olivetti-Undervood 21

22 lb.

105

Italy

Remington Mark 11

21 lb.

125

Eolland

Olivetti Underwood Letters 32 12 lb.

Italy

Remington Ten Forty

15 lb.

Eolland

Acceptable -- Fair to Poor

Brother Deluxe 885

11 lb.

Japan

Remington Streamliner

13 lb.

Holland

Sears Attache

15 lb.

Hermes Rocket

9 lb.

Switzerland

Smith-Corona Corsair

10 lb.

U.S.A.

Royal Skylark

13 lb.

ffnlInnd

Source: Consumer Report (November 1966) pp. 527/ 523•

118

cateqory all were foreign machines. In the liqhtveight
cateqory no machine received a rating of very good or
excellent and no O.S. manufactured machine received a
ratinq of qood. Thus one would conclude, as did the
consumer report, that the best portable typewriter to buy
— based upon their testing criteria — would be a foreiqn
produced machine. If in the future these tests reflected
the sane basic results and the buying public continued to
take the advice of consumer report, then the market shares
of the O.S. typewriter manufacturers in the portable
‘typewriter lino would further deteriorate with the market
share of the foreign manufacturers continuing to increase.
Thus the possibility that the O.S. domestic typewriter
industry would continue to be heavily concentrated with one
firm dominating the market would indeed be great.

When the year 1966 was examined, similar results were
obtained.* 2 Out of the 25 machines analyzed, 76 percent
were known to be produced outside the O.S. while the rest
were produced inside the U.S. The machine recommended by
Consumer Report would be a foreiqn machine. In the
excellent category 60 percent of the machines were
completely foreiqn machines. In the very good cateqory 71
percent of the machines recommended were produced abroad.
And in the good cateqory none of the machines were produced
in the O.S. Again the conclusion would be that the best
■achiuo to buy is a foreign one. Thus one could conclude

119

that foreign manufacturers are making substantial inroads
into the n.S. narket both in terms of the quality of
performance and in teres of the quantity of machines sold.

S D. Cost Comp arison s

The influence of cost differences requires some
clarification. The typewriter industry's hourly wage in
the United States by the early 1960's for example, was
about three times the hourly waqes paid in West Sermany,
'the main exporter. However, fringe benefits are much
larqer overseas. On balance, it has been estimated that
foreiqn production costs of typewriters runs two-thirds to
three-lourths of those in the United States.* 3

Indeed, by the early 1960's, contemplation of
additional overseas movements of typewriter production was
qiven very serious reconsideration. There were still
substantial cost advantaqos in producing abroad. However,
the differences were such that including start-up costs a
period of about five years was required for returning the
initial investment. But there was some indication of
rising wage trends in Europe, which might unduly extend the
payback period for the initial investment. These trends
brouqbt the comparative advantage of manufacturing abroad
versus in thej United States into a closer relationship.
For some companies the advantage appeared to be to

120

modernize O.S. plants rather than to continue to shift
production abroad. 14

Any potential cost advantaqes that foreiqn producers
of the electric typewriters miqht have is offset by IBB.
"It is qeneral knowledqe that IBH produces components and
parts abroad both for its typewriters and electronic data
processinq equipment. This enables IBB' to have multiple
sources of supply. It also enables IBH to select a country
where raw material sources and labor skills miqht have a
relative production advantaqe. Also, the loqistics can be
'so formulated that minimal transportation expenses in
relation to value will be incurred.

E. Market Share Cons ider ation

While the impact of foreiqn competition in shift of
manufacturinq operations from the U.S. abroad has caused a
fundamental shift in the balance of payments effects of
typewriter exports and imports, market share trends as
measured have been much less affected. Table III-4 , in
Chapter III sets forth market shares by porcentaqes of the
lcadinq five American firms by a number of seqsents of the
typewriter market. The "other" cateqory represents a
number of small American firms, but mostly foreiqn
companies. For the office electric machine, the total of
the foreiqn manufacturers could not have exceeded 6.6

121

percent. However, at the other end of the range in the
portable typewriter sequent of the market, the share of the
foreiqn coopanies could have been as high as 17.6 percent.
Similarly, for the manual office typewriters, the share of
the foreign companies could have been almost 14.9 percent.

Since there are a number of foreiqn manufacturers,
the market share in D.S. consunption of the foreiqn
mancfacturcrs individually is relatively small. It is
unlikely that any individual manufacturer exceeds five per
cent, and the probability is more on the order of magnitude
*of 2-3 percent for the reasons indicated in the discussions
in the preceding chapter on the problems of marketing by
the foreiqn manufacturer.

However, as indicated, the foreiqn manufacturer could
make a significant penetration in particular segments of
the market. This is true in the low price range portable
typewriter. Where the dependence on marketing organization
by the foreiqn manufacturer is not great, the foreiqn
manufacturer can utilize the mass retailing outlets in
order to achieve distribution of the portable typewriter.
Dealers are typically used by the foreiqn manufacturers for
office typewriters.Some progress has been made throuqh
dealers in selling the manual office typewriter, but this
is a declining share of the oarket.

Even if foreign manufacturers wore to have a superior
product in the office electric typewriter, they could not

122

■ake substantial inroads on the established and increasing
Barket position of IBfl without some method for solvinq the
dileeca in marketing strategy detailed in the preceding
chapter on the role of marketing and distribution
"organizations.

This inportant aspect of marketing and service
organization is emphasized by the recent problens
encountered by the SCM Corporation in connection with
aarketinq its portable electric typewriter. The portable
electric typewriter of SCM must be sold primarily in the
‘consuncr market. To reach the consumer market, the
business economics of effective aarketinq and and servicing
the portable electric have virtually forced SCM to use the
independent dealer channel of distribution.

Purinq the last year, SCM has been dismantling its
branch and direct sales organization. Without a strong
product in the standard office electric typewriter field,
SCH has been unable to sustain a branch and direct sales
and service organization without a level of cost that had
seriously impaired its ability to be a viable competitor in
that sequent of the typewriter market.

Thus, the lesson is clear for the forciqn
Bauuf actuinr. If it has already developed a superior
office electric typewriter, there is a potential tor share
of the 0.5. market accounting for not nuch note than 2-3
percent. The alternative strategy is for the foreign

123

manufacturer to qamble somethinq on the order of $100
aillion in a $600 Billion industry as did Olivetti in the
attempt to either buy a marketing orqanization or to
establish one de novo. &n additional risk is that of
-incurring operatinq losses for an undetermined number of
years until a market density, sufficient to absorb the
heavy cost of a nationwide marketing and service
orqanization would produce sufficient volume to brinq these
costs as a percentage of sales down to a region required
for normal profitability.

124

FOOTMOTES TO CHAPTE3 V

1- 36 Stat. 11.32.

' s ~2. 38 Stat. 114, 156.

3. 42 Stat. 858, 926.

4. 46 Stat. 590, 683.

5. United States Typewriter, Analysis and Trends* 1958-66
(Uashinqton, D. C.; U.S. Department of Commerce, Business

'and Defense Services Administration) p. 2.

6. SCO Annual Report , 1960.

7. "Shifts Kay Improve Typewriter Hesults", Financial
World (January 11, 1961) p. 13.

8. Ibid .

9. I hM .

10. World Trade in Typewriter* 1948- 195B . (Uashinqton,
D.C.: U.S. Department of Commerce, Business and Defense
Services Administration, June 1959) p. 9.

11. iMil .. p. 4.

12. The sample of machines were selected by buyinq th?
most delux manual eoael or models — if two carriaqc sizes
were available — ot ten leadinq brands. If a low priced
unit was available it was also purchased. Also the middle
of the line models were purchased from 01 ivott i-ll ne’er wood,
Beuinqton, SCK and tioyal. These firms account for 80
percent of the market. Koyal has no middle line model.

125

13. "Modernizing Fever Hits Typewriter Plants," Business
Week , (March 18,1961) p. 130.

IS- Ibid .. p. 130.

126

CHAPTER VI

THE IHPACT OF THE IBH ELECTHIC TYPEW HIT ER

A. Early History of the Electr ics

The first American typewriter patented in 1829 by an
inventor named William Burt was a -"crude, clanking
contraption for printinq letters."* A really successful
typewriter for volume production was not achieved until
Sholes* typewriter of 1873. But the first American

* typewriter of 1829 was built around a revolving wheel with
an alphabet etched into its rim. The modern electric

typewriter, introduced by IBH in 1961, followed a basic
concept of the Burt machine. 2

In the intervening years, between 1829 and modern
developments for the electric typewriter, a number of
efforts had been made to produce an electric typewriter.
The Blickensderfer Electric of 1908 "had been quite an
impressive affair." 5 The Electric Power Typewriter Company
of Canada had brouqht out a "sound, well-designed electric"
in 1906 and in 1910 Ellis had brouqht out a "remarkable
machine, electrically powered, which was not only a
typewriter but an adding machine and a billing machine, to
boot. All these noble experiments had ended in disaster."*

In 1919, a James Smathers, of Kansas City, began
working on an electric typewriter. The North East Electric

12?

Company of Rochester, Hew Tork, took over the Saathers
models in the 1920's. Royal and Remington had electrics as
early as 1925, bnt dropped the programs within 3 or 4
years. 5

The ^ Remington electric attracted considerable
attention. In an analysis of the potentials of the
Reainqton electric, aany of the attributes of the electric
typewriter, which have led to its pre-eminent position,
particularly in office typewriters, were recoqnized. In a
detailed analysis, the advantages of the electric
‘typewriter were set forth.® The contributions of the Horth
East Electric Company in the development of the electric
typewriter were detailed and the pre-eminence of the
Reminqton Electric were discussed. The analysis concluded,
"Mow that the electric typewriter is here, we wonder how we
ever qot along without it, for it has such a broad field
for potential accomplishment ." 7

But despite the potentials of the electric typewriter
as seen by some, both Royal and Remington, which had
electrics by the aid 1920’s and had been offered the
Saathers model, left the field. Burroughs Corporation
entered the typewriter industry with both electrics and
■annals in 1935, but left the market in 1936.*

128

B. The Entry of IBK

In the midst of the depression (1933), International
Bnsiness Hachines entered the typewriter field by acquiring
a fira called Electronatic Typewriters, Inc., which
previously liad been a part of the Worth East Electric
Coapany. IBS's interest was said to- be aainly in the
possibility of acquiring some concepts that could be used
on its keypunch machine. Host of the major typewriter
producers did not see the potential of the electric
* typewriter. Indeed, writing in 1954, Bruce Bliven
commented, "The typist has not yet brought in her final
verdict."*

When IBS made its decision to enter the typewriter
industry, it went all the way. As a Porbes article pointed
out, "President Thomas Watson continued to believe that the
electric's time would come". In retrospect the article
pointed out that "industry gossip has it that IBS didn't
actually make money on its electric until three or four
years aqo".*® The article concluded by stating:

Whether true or not, IBS by a 28 year
display of quts and preseverance can now take
satisfaction that its qamble has fully paid off
and has put the company so far ahead of its
competitors that it today dosinantes this capidly
increasing market.

129

C. The War Years- J35JrJSi}§

Daring the World War II period, the country was
divided into critical zones with regard to the war effort.
The northeast area was declared a critical zone. Within
three months after Pearl Harbor, the traditional old-line
typewriter companies were ordered to cease producing
typewriters and to devote their production facilities to
products contributing to the war effort. There were two
major exceptions. One was the Woodstock Typewriter

* Cocpany, whose plant in Chicago, Illinois was premitted to
continue to sake manuals on a United basis.

The other important exception was IBH. IBH was

producing typewriters in an area not included in the

critical Hew England area. Not only did IEfl continue to

produce its electric typewriters, but the conpany was
successful in the acceptance of its sales slogan that one
electric replaced two manual typewriters and thus saved
both materials and labor. IBH was particularly successful
in selling the electric typewriters to government agencies.
This resulted in the assigning of priority requests so that
IBH was able to receive materials for continued manufacture
of the electric typewriter.

It is interesting and ironic to note that almost
immediately after the stoppage of the production of
typewriters a great shortage of typewriters arose in the

130

governmental aqencies. This was to provide a qreat
advantage to IBS.

Badio listeners in early 1943 were made aware of the
P.S. Government's critical need of typewriters. Durinq the
war the D.S. Artsy estimated a need for 1 million machines.
The Royal Company had on its enveloped the sloqan, "Oar
fiqhtinq men need 25 percent of your typewriters, sell them
today throuqh your nearest War Production Board Offices". 12

By December 1943, limited production of typewriters
for use in the Army, Navy and flaritime Commission had been
'authorized in non critical labor areas. The Royal plant,
which was located in a critical region, was not authorized
to resume production. On December 6, 1943 Reminqton Rand
said it was producing a small number of typewriters for
government use only. Around the same time, L.C. Smith &
Corona resumed manufacture of typewriters on a very limited
scale under the authorization of the War Production Board.
On a radio broadcast of December 5, 1943, it was reported
that typewriter rationing was beinq eased. This occurred
for two reasons: (1) Decreased government requirements for
used typewriters and (2) limited manufacture of new
machines. Rationinq of all used and new machines ended
Saturday April 22, 1944.»»

Pull peacetime production of typewriter commenced on
July 1, 1946. By the 23rd of the month, Reminqton Rand was
in full production of manuals. Shortly thereafter most of

131

the other manufacturers were qetting back into full
production with large backlogs of orders. At about the
sane tine, an industry strike occurred which - slowed
production. By July 28,1947 the strike was being
settled.*♦

Thus, government policy, as it affected IBB during
the Borld Bar II period was of great' significance in its
inpact on the structure of the industry following the war.
By placing electric typewriters with government agencies
and na-Jor war contractors, a nunber of market results were
* accomplished by IBB. First, IBB was able to introduce its
electric typewriters at a nuch faster pace than otherwise.
Second, the wide experience with the electric typewriter
during Sorld Bar II contributed to product acceptance which
provided IBB with a favorable market in the postwar
years.** Third, the old line nanual typewriter companies
suffered two unfavorable consequences. (A) Bhen the war
ended, the first priority for the nanual typewriter
conpanies was to renew their skills with the nanual
typewriter. They had been producing other products during
the war so that it would have been extremely risky to
attenpt to begin with an entirely new product such as an
electric. (B) because of the product acceptance achieved
by IBB during the war period, the tine available to the
old-line producers of nanual typewriters to develop

electric typewriters to neet the narket impact of IBB was

132

shortened

this combination of the impetus and advantages
provided by IB3 during the war, the taking of the major
traditional typewriter companies out of the typewriter
business for almost four years, has not only had a lasting
impact upon the manual typewriter companies, but has also
had a substantial impact on the subsequent developments of
the industry’s structure.

D. Adv anta ges of the E lectric Type writer o ver the Hanual
' Typew r ite r

The initial demand for electric typewriters began
durinq the early 1950’s. At that time a number of factors
led businessmen to seek ways to operate their firms more
efficiently. The first of these factors was the increased
volume of paperwork resulting from the demands of modern
business and the expanded requirements for statistical
information to comply with federal and state legislation
and union demands. Concurrent with the jump in paperwork
cane a larqe increase in both the number of new firms and
the number of office employees. From 1939 to 1953 the
number of firms increased from 3.2 million to 4.2 million.
The increase in the number of office employees as measured
by the ratio of office help to total employed rose from 4
percent in 1930 to 13.6 percent in January of 1954.

133

Thus the demand for office typewriters has risen in
proportion to the increase in the nusber of firms in
existence and the increase in the volume of office help.
However, coupled with the increases in the volume of paper
wort, the number of firms and the quantity of office help
was the inflexability of waqe costs and the spread of the
five day worlc week which placed a premium on labor savinq
devices for office use.

The early phase in the demand for office typewriters
is summarized in an industry survey of that period. It
stated:

ilonq vith electronic devices, businessmen
are interested in automation of other office
details and particularly in electric typewriters.
The qrowinq trend toward mechanization of
clerical routine is expanding this market
rapidly. Electrics currently constitute 30
percent of office typewriter sales against 10
percent in 1950. with clerical wages going up
steadily and qualified personnel relatively
scarce the electric machine with its faster
operations offers the businessmen a way to hold
cost down. 16

Thus the period of the early 1950's is characterized
as one in which business and government were becominq aware
of the increased demands placed upon them by a greater
volume of paper work and by the need to become cost
conscious in the office due to qeneral waqe increases and a
shorter workweek.

By the early 1960's the magnitude of the electric
typewriter's influence was fully felt. Over the past

134

Thus the demand for office typewriters has risen in
proportion to- the increase in the number of firms in
existence and the increase in the volume of office help.
However, coupled with the increases in the volume of paper
work, the number of firms and the quantity of office help
was the inflexability of waqe costs and the spread of the
fixe day work week which placed a premium on labor savinq
devices for office use.

The early phase in the demand for office typewriters
is summarized in an industry survey of that period. It
stated:

Along with electronic devices, businessmen
are interested in automation of other office
details and particularly in electric typewriters.
The qrowinq trend toward mechanization of
clerical routine is expanding this market
rapidly. Electrics currently constitute 30
percent of office typewriter sales aqainst 10
percent in 1950. Kith clerical waqes qoinq up
steadily and qualified personnel relatively
scarce the electric machine with its faster
operations offers the businessmen a way to hold
cost down.* 6

Thus the period of the early 1950's is characterized
as one in which business and government were becoming aware
of the increased demands placed upon then by a greater
volume of paper work and by the need to become cost
conscious in the office due to qeneral waqe increases and a
shorter workweek.

By the early 1960's the magnitude of the electric
typewriter's influence was fully felt. Over the past

134

decade the sale of manual typewriters has decreased by
about 40 percent. In 1961 the office electric typewriter
sales accounted for approxiaately one-third the dollar
sales volnae of the typewriter industry. By 1965 this had
increased to abour 49 percent and by 1967 was 50 percent of
total typewriter sales. 17

In today's world of business - and government the
qreater popularity of the electric typewriter arises from 5
specific factors: (1) unifora print, (2) lore uniform
copies, (3) less fatigue to the operator, (4) new operating
features and (5) reduction of secretarial turnover.

With the development of the electric typewriter it
becaae possible to have each stroke of the typewriter made
with the saae degree of pressure; with the nanual the
iwpact of the keys upon the paper depends upon the applied
pressure of the operator. As a result the electric
typewriter provides better lookinq oriqinals. As lonq as a
stenographer has the basic knowledge of spellinq,
punctuation and letter structure, she can produce a high
quality letter on an electric. With added typo styles and
the carbon ribbon one can now produce sharply
etchedcharacters that compliment and fully expose the type
design, thus further improving the appearance of
correspondence. On the other hand, the quality of output
on the manual typewriter depends larqely on the skill of
the operator.

135

An added factor to consider is that of norale.
Because the electric provides a good final copy, reqardless
of how experienced the user, even the less skilled worker
can produce nore hiqh quality final copies. She thus
reinforces her own aorale and helps inprove the over-all
working environnent of the office.

By insurinq uniforn print the electric typewriter can
produce a much larqer quantity of clear carbon copies.
Hithout any adjustment most electrics can produce five to
seven leqible copies. With an adjustment of the impression
* requlator (by the typist) nany nore copies can be nade.
Thus for those firas that do not have access to a quality
photo reproducer a considerable amount of tine will be
saved by producinq a nuch larqer quantity of originals on
the typewriter, nore work can then be accomplished in the
sane qiven anount of tine, thereby helping to reduce
clerical costs.

The third advantaqe of the electric over the nanual
is an inportant selling feature of the electric -- this is
the fatique factor. Approximately two ounces of pressure
is required to activate the key on an electric, compared to
approximately two pounds of pressure on the nanual. By
usinq an electric, a full tine typist will be less
fatiqued. She can produce nore work in a qiven period with
less expenditure of effort. Despite the hiqher initial
cost of the electric typewriter, if an increase in work

13 6

efficiency — on the order of three to five percent — is
achieved the use of the electric typewriter would seen to
be economically practical.

The fourth advantage of the electric typewriter is
also related to increased productivity — this is the
introduction of new features made possible only by the
electric typewriter. Items such as an automatic carriage
return, proportional spacing, horizontal half spacing, and
automatic repeat actions such as dots, dashes, underscores
and crossouts not only decrease the amount of fatigue
typically encountered in manual operation but also decrease
the tine involved to complete a piece of wort. This helps
increase productivity and lower clerical costs.

There has been a sharp increase in the popularity of
the electric typewriter among secretarial personnel due
largely to the advantages that have been outlined above.
By providing their staff with a more acceptable machine,
firms have substantially reduced the turnover of
secretarial personnel. This reduction in turnover has led,
in turn, to lower employment and training costs.**

The advantages of the electric typewriter can bo
further examined by analyzing them in terms of a capital
budgeting model. Assume a firm is considering the
replacement of all its manual typewriters with electrics.**
The reason for the replacement of the typewriters is that
the firm is convinced that substantial savings can be

137

obtained by an increase in office productivity.The
increased productivity is due to four factors. These are:
Cl) increased speed, (2) better quality of work, (3) the
ability to use typists of lover quality and still produce
hiqh quality work (especially on stencils and dittos), and
(3) the reduction of fatique.

The level of increased productivity can vary
considerably. As mentioned earlier in the chapter, IBH —
durinq World War II — claimed that with the electric
typewriter one typist could do the work of two. This would
have increased the work efficiency by 50 percent or could
have reduced the labor force by 50 percent.

Today the increase in productivity varies with the
nature of the user. At one extreme, the aerospace industry
would constantly have typewriters in use producing the
larqe volume of proposals for new projects. Here the
advantages of the electric typewriter would be substantial.
At the other extreme a bank may have a girl typinq fiqures
or correspondence for one or two hours per day. In this
case the increase in productivity would be of a smaller
magnitude. The experience of a number of firms indicates
that they can obtain a 10 percent increase in productivity
with the use of the electric typewriter. If a secretary
devotes 50 percent of her time to typinq and earns $100 per
week, then 10 percent of $50 would be a savings of S5.00
per week. If a 50 week year is assumed then the annual

138

savings per machine would be $250.

The sales of the firm average around $110 Billion
each year. At present the firm has 100 manual typewriters
that it purchased in 1964 at a price of $236. In 1964 the
firn estimated the economic life of the asset to be 8
years, and at the end of that tine they would have a
salvaqe valuem of $40 per machine. If the firm buys the
electric typewriters it will cost then $480 per machine.
The economic life of the asset is 5 years and would have a
salvaqe value of $144.

The calculations for the analysis are shown in Table
YI-1. The capital budgeting technique used to analyze the
replacement decision is that of Net Present Value. The Net
Present Value technique discounts the inflows at the cost
of capital and relates the present value of the inflows to
the present value of the outflows. If the net present
value is positive, the prolect is accepted. If it is
neqative, it is relucted. Hany theoreticians have deemed
this technique to be the most theoretically correct. Here
it is assumed that the firms cost of capital is 10 percent.
The analysis separates the inflows from the outflows and
analyzes them on an after tax basis. It is assumed that
the tax rate is 50 percent.

The initial investment for 100 new electric
typewriters at S480 is $48,000. This event has a zero
timing since it occurs now and has a present value factor

139

140

TABLE VI-1

CALCULATIONS FOR REPLACEMENT DECISION AT 10 PERCENT EFFICIENCY

Outflows at time investment Is made;
Investment in new

AMOUNT

BEFORE

TAX

AMOUNT

AFTER

TAX

YEAR

EVENT

OCCURS

FACTOR
at 10%

PRESENT

equipment

48,000

1.0

48,000

Sales price of old

(5,000)

1.0

(5,000)

Tax loss on sale

Total outflows (present value

(2,350)
of costs)

(1,175)

1.0

-(1.175),
$ 41,825

Inflows, or annual returns:
Benefits

25,000

12,500

1-5

3.791

47,388

Depreciation on new
(annual)

9,600

4,800

1-5

3.791

18,197

Depreciation on old
(annual)

(2,450)

(1,225)

1-3

2.487

(3,046)

Salvage value on new

14,400

5 th

.621

8,942

Maintenance on new

(3,570)

(1,785)

1-5

3.791

( 6 , 767 )

Maintenance on old

2,100

1,050

1-3

2.487

2,614

Total inflows (present value of benefits)

$ 67 , 328 ”

Present value of inflows, less

present value of

outflows

- $25,503

of 1.0. The sale of the 100 aanual aachines is a negative
outflow and is assumed to occur at the sane tine as the
purchase of the new aachine, at the tine of the sale the
fira was able to realize $50 per aachine. When the aanuals
were purchased in 1964 it was deternined that their
econoaic life was 8 years. Osing straight line
depreciation and depreciation eacli aachine toward a $40
salvage value would yield an annual aaount of depreciation
of $24.50 per aachine. This assuaes an initial purchase
price of $236. The aachines are 5 years old and have a
book value of $7,350; since the fira only realized $5,000
froa their sale there was a loss of $2,350 before taxes.
This aaount is also a negative outflow. Thus the present
value of the outflows with a zero tine factor is $41,825.

By replacing the manuals, the fira will save $250 per
aachine or $25,000 per year before taxes for all the
aachines. It is assuaed that the economic life of the
electric typewriters is 5 years. The present value factor
of an annuity for 5 years is 3.791. With a useful life of
5 years and a salvage value of $144 per electric machine.
The annual straight line aaount of depreciation on the
electrics will be $9,600 per year before taxes. With the
sale of the aanuals the firs will lose the advantage of
depreciation froa the manuals. This is a negative inflow
for 3 years. The salvaqe value on the electrics will be
$144 per aachine and will occur in the 5th year.

1*1

With the parchase of the electrics an annual service
contract is arranged at $35.70 per aachine. However with
the sale of the aannals the fira will save service costs of
$21 per aachine for 3 years.

The present value of the inflows is $67,328. The net
present value is $25,503. According to the decision

criterion of net present value the fira should aake the

replaceaent decision.

In addition to calculating the net present value for
the replaceaent decision, one could also calculate the
'internal rate of return on the project. The internal rate
of return is defined as that rate of discount that equates
the present value of the inflows to the present value of

the outflows. Table VI-2 presents the data on the

calculations for the internal rate of return. First the
annual net cash flows are calculated. These are defined as
benefits plus depreciation plus a rebate on the naintenance
expense for the annuals less the loss of depreciation on
the old aachine and the aaount of aaintenance expense on
the electrics. With the cash flows deterained one can
calculate the internal rate of return. Throuqh trial and
error it was found that the internal rate of return was
between 29 and 30 percent. If aanaqeaent was using a cost
of capital of 10 percent, the replaceaent decision would be
worth while.

If, on the other hand, the increase in productivity

TABLE VI-2

CALCULATIONS FOR INTERNAL RATE OF RETURN

Determining Net Cash Flows :

Years 1-3

Year 4

Year 5

Benefits
+Depreciation
on New

$12,500

4,800

$12,500

4,800

$12,500

4,800

-Depreciation
on Old

$17,300

1,225

$17,300

-Maintenance
, on New

$16,075

1,785

$17,300

1,785

$17,300

1,785

+Maintenance
on Old

$14,290

1,050

$15,515

+Salvage Value

$15,340

$15,515

14,400

Annual net Cash

Flows

$15,340

$15,515

$29,915

Determining the

Internal

Rate of Return:

At 297,

307,

Cash

Interest

Years

Flow

Factor

$15,340

.775

$15,340

.601

$15,340

.466

$15,515

.361

$29,915

.280

Present

Value of

Cash Flows:

-Present

Value of

Outflows:

New Present Value

Present

Value

Interest

Factor

Present

Value

$11,888

.769

$11,796

9,219

.592

9,081

7,148

.455

6,980

5,601

.350

5,430

8,376

.270

8,077

$42,232

$41,364

$41,825

$ 407

$ (461)

was only between 3-5 percent, the replacement would still
be worth while. The calculations for an increase in
productivity of 5 percent are shown in Table VI-3. The net
present value is 11,809 which is wuch smaller than when a
10 percent increase in productivity was assumed. But
still, the factors of increased quality and decreased
fatique were not fully taken into account.

In reality this type of investnent decision is such
that it falls into the class of absolute necessity. A rate
of return analysis is not as important as with other
'investnent decisions. It is a known fact that a firm that
wants to operate efficiently must have a good lighting,
heatinq and coolinq system. Sinilarly, a firm must have
typewriters to handle the larqe volume of paperwork. In
today’s world qood typists wouldn't consider working in an
office without an electric typewriter.

Thus there exists several distinct advantages in the
use of the electric versus the manual typewriter. The

over-all

advantage reflects

itself in

the

ability

business

and government to

increase

the

level

productivity while at the same time reducing the over-all
cost of office operations.

E. Spe cific Advantages to I.B,H,

foreign companies bad developed electrics early

144

TABLE VI-3

CALCULATIONS FOR REPLACEMENT DECISION AT 5 PERCENT EFFICIENCY

AMOUNT

BEFORE

TAX

Outflows at time Investment Is made:

Investment in new

AMOUNT

AFTER

TAX

YEAR

EVENT

OCCURS

FACTOR
at 107.

PRESENT

VALUE

equipment

48,000

1.0

48,000

Sales price of old

(5,000)

1.0

(5,000)

Tax loss on sale
Total outflows

(2,350)

(present value of costs)

(1,175)

1.0

—(1.1.17,3)...
$ 41,825

Inflows, or annual returns:
Benefits

12,500

6,250

1-5

3.791

23,694

Depreciation on new
(annual)

9,600

4,800

1-5

( 3.791

18,197

Depreciation on old
(annual)

(2,450)

(1,225)

1-3

2.487

(3,046)

Salvage value on new

14,400

5th

.621

8,942

Maintenance on new

(3,570)

(1,785)

1-5

3.79

(6,767)

Maintenance on old

2,100

1,050

1-3

2.487

2,614

Total inflows (present value of benefits)

$43,634

Present value of inflows, less

present value of

outflows

- $1,809

because this was the direction of their aarket pressures.
Sith the relatively snail markets defined by national
boundaries, before the establishment of the European
Economic Community and the European Free Trade Association,
the coapanies in individual countries focused on technical
developaents. The aia was to develop a proprietary product
with distinct features and performance advantages which
would enable the company to carve out a selected and
soaewhat protected share of the aarket. The rapidly
expanding aarket for electric typewriters in the U.S.
* offered attractive possibilities to the foreign
aanufacturers, but their potentials for any significant
aarket penetration were liaited by aarketing and
distribution problems of the type discussed in detail in
Chapter IV, dealing with the distribution system.
Basically, to establish a direct sales organization nation
wide involves huqe outlays and continued operating losses
until the necessary voluae can be obtained to support such
an organization. This has provided IBH, by sellinq at
prices conpetitive with both aanuals and other electric
typewriters, a sufficient aargin for continuous improveaent
in the basic product.

These advantages have been autually reinforcing. IBM
started with a qood machine. Taking off froa a nationwide
organization established in connection with its unit record
eguipaent before the advent of electronic data processing

equipment, IBB boilt a comparably strong marketing and
service organization in the electric typewriter industry.
Harketinq and service costs could thus be spread over a
larqe Qusbcr of units and represented a snail p e rcentaga of
sellinq prices.

ill of the major producers of office electric
typewriters now have service contracts that are similar in
mature. The annual cost of a service contract is
approximately $42.00. Service contract discounts are given
on all purchases of 5 or more machines. A 5 percent
* discount is given on purchases of 5-24 machines, a 10
percent discount is qiven on purchases of 25 to 49
machines, and a 15 percent discount is qiven on purchases
above 50 machines. Sperry Rand provides an attractive 3
year service contract at a cost of S104.85. If more than
25 machines are purchased the service contract is provided
at a cost of $84.00. Royal on the other hand no lonqer
provides discounts on a 3 year contract. This may be the
result of a larqe number on mechanical breakdowns on the
Royal office electric typewriter. The reinforcing
advantages of low cost, stronq market position and improved
market product have provided IBB with an increasingly
dominant position in the electric typewriter field, and
thus the typewriter market as a whole.

Second, in concentrating on a larqe and attractive
segment of the typewriter market, with the density of its

147

marketing and servicinq organization, IBH has been able to
achieve two other marketing strateqies. It has been able
to assiqn smaller and smaller territories to its sales anc’
service staff, and yet provide compensation substantial!}
higher than its competition could offer. Thus, interna
coverage of smaller market areas is achieved. This intens<
coveraqe includes attention to even the small, individua
office, and thus sweeps virtually all segments of th
available market for standard electric typewriters into th
IBH orbit.

A third important advantage for IBH is that its sale
and service organization can carry a broad line o
typewriter-kind of products. This is an even greatr
advantaqe than the attempt to combine typewriters and othc
types of office machines such as calculators in its diroc
salesmen. The latter attempt has some advantages, lx
involved sufficiently different unit values and functloi
so that the kind of specialization and knowledge '
products achieved by IBH's salesmen in the
typewriter-related line in not equalled. The lino
products carried by the IBH salesmen are focused on t
Hodel D typewriter, the Executive Proportional Spncl
typewriter, the Haqnetic Tape/Selectric typewriter,
composing typewriter which combines the editinq capablll
of the HT/ST with an automatic margin and page spncl
capability, IBH dictating nachineds, and typewrit

148

supplies.

A fourth important advantage of IBB in the typewriter
aarket is its carryover with its commanding position in the
electronic data processinq industry. In sellinq EDP
products, IBB salesmen achieve market acceptance for the
full line of IBB products, particularly since EDP purchases
are aade at the vice-presidential and hiqher levels. This
obtains product acceptance with officials who are superior
in position to purchasinq aqents who aay aake the final
decision on the purchase of typewriters.

ks emphasized in the previous discussion of aarketinq
and distribution systems in the typewriter industry and in
discussinq the impact of foreiqn competition, the
conaandinq position of IBB is reinforcinq and increasinq,
particularly in the typewriter industry. The advantaqes of
a qood product, favorable density factor for reducing costs
of a large aarketinq and servicing organization with
intensive coverage of individual areas and customer, the
resulting favorable aarqin for continued product
iaprovenent, the atolity to attract high quality salesmen
and custoaer engineers by favorable conpensation payments
are all autually reinforcinq.

Thus, in the full-featured electric typewriter
seqaent of the industry, which by dollar voluae represents
approxiaately one-half of the total typewriter industry,
IBB increased its market share during the period 1960

lU?

through 1968 by approximately 18 percentage points to
almost 80 percent of the market.

This increase in IBFl's aarket share in an eight-year
period of tine is eguivalent to acquiring a number of
typewriter businesses of a magnitude equal to that now held
by almost all of the other typewriter companies, both
dom estic and foreign. Thus, if the emphasis of the
structural approach to markets is followed, an increase in
concentration by the already dominant firm from over 60
percent of the market to alaost 80 percent, has a greater
iapact on market concentration than would the merging of
any two or three other firms in the industry. But more
iaportant, it demonstrates the need for entry conditions
into the industry of a nature that would make it possible
to stem the continued and increasing advantages of IBn.

F. The Deve lop ment of the Electric Por tab le by SCH

While IBH is the recognized leader in office
electric typewriters another coapany has expended a great
deal of enerqy, tine and aoney in the development of the
electric portable typewriter. SCH recognized that as larqe
as the aarket is for office electric typewriters another
■arket for electric aachincs had eaerged — that of the usa
of electric typewriters in the home. Recoqnizinq that the
IBH Selectric would cost around $900 and that other

150

electrics would be somewhat less expensive but still quite
hiqh, a new concept was needed to bring the electric
typewriter into the hone at a lore reasonable cost to the
consumer.

The SCtl portable electric has been on the market
since the early 1960's. The need for such a aachine was
eaphasized in their annual reports for 1961 and 1964. In
the 1961 report they stated:

Hiqh school and college students who
coaprise the najor market are expected to
increase from 13 million in 1960 to 17 million by
1965, a 30 percent increase.

In their 1964 report they further pointed out that:

Two surveys coverinq 2,000 dealers and
students at 10 universities indicated that nore
and nore consumers are demanding electric
portables.**

Thus exists a clear and distinct aarket for electric
portables in the life of students, in the hoae and in small
business.

In 1961 the SCH portable typewriter was sold by over
12,000 dealers throughout the U.S. Also, a line of
portables was developed for exclusive sale by selected
dealers.In addition, portable typewriters were sold under
private labels such as the Tower Line for Sears, the Golden
Shield Line by Golden Shield Corporation, and the
Enterprise distributed by World Book.

151

At this time SCH was the only producer of electric
portables and the second larqest producer of electric
typewriters. In 1967 SCH still aaintained this position
with 9.7 percent of the office electric aarket , 43.5
percent of the portable market and 17.5 percent of the
total typewriter aarket.

In 1963 SCB introduced the Poweriter, the worlds
first self powered electric typewriter which had a self
contained rechargeable nickel cadmium energy cell.And in
1968 another model — the 210 Automatic Portable — was
* added which had a power carriage return and power spacing.

Besides the portable electric line, SCH also produces
a compact office electric aodel — the SCH 250. In 1968
the Secretarial 315 office electric typewriter was
introduced. Unable to compete against IBH and due to
economic conditions which made the firm unable to hire,
train and maintain salesmen and facilities in all but a few
large metropolitan areas, SCH has had to discontinue its
direct sales organization for office electric typewriters.

During 1968 sales of the SCH electric portable
increased alonq with its share of the domestic market. To
a degree this shows the extent to which consumers have
accepted the portable electric. However data on the
technical efficiency of the machine is quite scarce. The
Consumer Bulletin for 1968 found that the SCH portable
electric was a good machine and recommended its purchase.**

152

One case that developed which nay question the
reliability of the SCH electrics is the experience of the
los Inqeles School System. It was fonnd that the SCH model
250 office electric was not satisfactory in terns of
maintenance. Portables and coapact office electrics will
no lonqer be used in the classroom for they are unable to
stand up to constant hard usaqe. Nothing less than full
office machines will be used in the future. Thus in this
area SCH appears to have run into a certain degree of
difficulty. Hore details on this problem will be examined
in the chapter dealinq with the educational market for
typewriters.

153

FOOTNOTES TO CH APTER VI

1. "Hew Typewriter Uses Old Idea," Business W eek (August

5, 1961) p. 48.

2. Ibid.

3. Bruce Bliven, Jr., The Won derful Writing Machine (New
Tork: Random House, 1954) p. 171.

4 . Ibid.

5. "Hodernizinq Fever Hits Typewriter Plants", Business
Week ((larch 18, 1961) p. 126.

6.. "At Last, a Completely Electrified Typewriter," Gas and
El ectric New s. published by the Rochester Gas £ Electric
Corporation, Vol. 14 (April 1927) p. 377.

7. Ibid.

8. Business Week . Harch 18, 1961, op, cit .. p. 126.

9. Bruce Bliven, op 4 -cit., p. 172.

10. "Good Hanaqeaent kn Action", Forbe s (October 15, 1961)
p. 23.

11. Ibid.

12. Arthur Foulke, Hr* Typewriter (Boston: Christopher
Publishing House, 1961) p. 123.

13. IbjL<l.» P- 112.

154

14. Ibid., p. 114

15. Business Week, flarch 18, 1961, op. cit.. p. 126.

16. Standard S Poors, Industry Surveys . Office Equipment
Industry, June 2i, 1956.

17. John Sine, "Typewriters", Adm inist ra tiv e Banagenent
(Bay 1961 p. 73.; and Facts f or Industry Series K35C,
1948-1967, Bureau of the Census, “ O.S. Department of
Commerce.

18. The basic ideas of this section were developed with
the aid of Lawrence Erickson, Dean of the School of
Education ,UCLA and Wayne K. Boulton, Product Analysts for
Royal Typewriter Division, Litton Industries.

19. To obtain this information, it was agreed that
individual firm names would not be used.

20. SC H Ann ual R eport fo r 1961 .

21. SCB Annual Report for- 1964.

22. Con sumer Bulle t in (Annual 1968) p. 52.

155

CHAPTER VII

HISTOBY ABD DIVERSIFICATION POLICIES OF THE TYPEHBITEB

COHPAHIES

Since 1873. the year in which typewriters went into
production at the E. Remington 6 Sons factory in New York,
three hundred ninety manufacturers of typewriters have come
into being. Two hundred fifty of these were foreiqn
companies. By 1960, only fifty manufacturers remained.
Si* of these were in the O.S., while forty-four were
foreiqn nanufacturinq companies. By 1968 there were five
American conpanies of major significance in the
manufacturing and sale of typewriters in the U.S. These
were International Business Machines; Sperry-Rand, which
included the predecessor Remington Rand; Litton Industries,
which included the Royal Typewriter Company;
Onderwood-Olivetti; and the SCH Corporation, which included
the predecessor, L. C. Smith Company.

A. jjistorjf of Firm Disappearance in the Typewriter

Inausjri

Hith only six of the oriqinal 140 O.S. typewriter
firms remaining today, a question arises as to what
happened to the other 134 firms. Bruce Bliven, in his book

156

The Wonderful Writing Hachine . lists 86 separate U.S.
typewriter manufacturers and 22 foreiqn manufacturers. It
was decided to analyze the 86 domestic coapanies in an
atteapt to trace their history. 1

Appendix I and II at the end of the chapter briefly
outlines the history of the companies. Of the 86 firas
listed by Bruce Bliven, data on 85 coapanies were
available. Table VII-1 presents a suamary sheet of the
appendix data.

Of the 85 firms, 57 of them, or 67 percent went
* bankrupt. Another 7 firms were predecessors to other
typewriter firas that eventually went bankrupt. Six firms
aerged with other firas that also went bankrupt. Of the 85
firas two typewriter firms aerged with other firms that
exist today but are not part of the typewriter industry.
Another two aerqed with other typewriter firms that
eventually merqed with oxistinq firms, while 6 firms aerqed
directly with existing firms.

The trend of concentration is quite visible froa this
suaaary table. Of the 85 firms that vere in exstence in
the early 1900's only five firms exist today. This aeans
that 80 firms or 94 percent disappeared from 1910-1969. Of
the 80 firms, 70 of then disappeared by bankruptcy, either
directly or after aerqing with other firms that in turn
disappeared by bankruptcy, this accounts for 82.2 percent
of the firas. These firas were the failures, and as such.

»57

TABLE VII-1

SUMMARY OF APPENDIX I AND II
1910-1965

Percent

Category_ Number of Total

TOTAL FIRMS

100.0%

Cl) Firms that disappeared
by bankruptcy

67.0%

(2) Firms that were predecessors

to other firms that disappeared
by bankruptcy

8.2

.(3) Firms that Merged with others
that disappeared by bankruptcy

7.0

SUBTOTAL: Disappeared by Bankruptcy

82.27.

(4) Firms that Merged with 5
Existing Firms

9.4

(5) Firms that Merged with other
Firms that Exist but not in
the Typewriter Industry

2.4

SUBTOTAL

94.0%

(6) Firms that still exist today

6.0

TOTAL

100.0%

158

would not have contributed ouch to an acquiring firw.
Further evidence of this is that 6 of the 70 did werge with
other firas which eventually disappeared by bankruptcy.

In total, there were 16 firas that underwent sone
fora of nerqer activity. Of the 16 that aerqed, 10 aerqed
with other firas and stayed alive while the other 6
disappeared. While the data are not definitive on this, it
deaonstrates that aerqinq or the acquiring of firas was not
a quarantee of either continued narket effectiveness or
even survival. And certainly the nergers did not result in
*narket control. But the data does indicate that the market
structure of the industry has been transformed froa one
with 86 firas to one that is highly concentrated with five
firas accounting for over 80 percent of the industry sales.

B. Berger- Pat terns in the Typewriter I ndu s try

Each of the five surviving U.S. typewriter companies
had enqaged in diversification and merger programs at some
tine during their history. A conspectus of the aerger
history of the five surviving U.S. typewriter companies is
shown in Table VII-2. The L.C. Smith Company, represented
by the four Smith brothers, had joined in the Union
Typewriter Coapany, which had been formed in 1893. In 1903
the Saith Coapany separated froa Union Typewriter Coapany,
foraing the L.C. Saith C Co. In 1926, the L.C. Saith

139

TABLE VXI-2

MHtGHl HISTORY OUTLINE OF THE FIVE SURVIVING U.S. TYPEWRITER COMPANIES

Surviving

Date

Acquisitions

Company

L.C* Smith & Co*

1903

From Union typewriter

L.C. Smith k Co.

1926

Corona

Smith-Corona

1956

1958

Kleinschmidt Labs
Merchant

SCM Corp.

Underwood

1927

Elliot-Fisher

Undervood-Elliot-

1963

Olivetti

Fisher

Olivetti-Underwood

Royal

1954

McBee

Royal-McBee

1965

Litton

1966

Imperial typewriter of

Litton

IBM

1933

England

Electromatic typewriters,

Inc. IBM

E. Remington &
Sons

1886

Sold to Wyekoff, Seamans

and Benedict

1893

Became a part of Union typewriter Company,

vhlch combined Remington (Wyekoff, Seamans and
Benedict) vith Yost, Monarch, Smith Brothers,
and Densmore.

1903 Remington Typewriter Company separated from the
Union typewriter Company

1924 Noiseless Typewriter Company

1927 Rand Company Remington Rand

1955 Sperry Gyroscope Co. Sperry Rand Co.

Source: Various Histories and Moody’s Investment Manuals.

l<o

Company merged with the Corona Coapany, which had developed
an excellent portable typewriter. In 1956, the
Kleinschaidt Laboratories were acquired. In 1958, a aerger
with Harchant, a calculating aacbine coapany, resulted in
theforaation of the SCH Corporation. The SCB Corporation
enqaqed in an active aerqer and diversification prograa
which will be discussed in a later section of this chapter
dealinq with the post World War II strategies of the
typewriter coapanies.

The Onderwood Coapany had been an early leader in the
industry. Its only aajor aerqer was with the Elliot-Pisher
Coapany, an office aachine company. The naae was then the
Onderwood Elliot-Pisher Company, until 1995, when it became
known as the Onderwood Coapany. Hountinq difficulties in
the late 1950’s resulted in investments by Olivetti and in
1963 Olivetti took full ownership and control of Underwood.

The Boyal Typewriter Coapany was a premier typewriter
coapany during much of its history. It beqan facinq
increased difficulties in the 1950’s. In 1954, a aerger
was effected with the HcBee Coapany, an office aachine
coapany. Difficulties increased and continued, however.
In 1965 the Boyal Typewriter Company was acquired by Litton
Industries. Litton Industries subsequently acquired the
laperial Typewriter Coapany of Enqland in 1966.

International Business Bachines had not been in the
typewriter business. Some of the equipment used in

161

connection with its unit record accounting and tabulating
■achines employed principles sinilar to typewriters. This
was particularly true of the key punch machines. This was
the basis for IBM's interest and willingness to buy
Electromatic Typewriters, Inc., in 1933, after it had been-
offered to both Underwood and Remington.

The merger history of the Remington Company is
somewhat more detailed. E. Remington £ Sons began
producing the first typewriters in 1873. In 1886, after
encountering financial difficulties, the typewriter portion
* of the Remington Company was sold to Hyckoff, Seamans and
Benedict. This business was an important component of the
Union Typewriter Company formed in 1893. In addition to
the Reninqton manufacturing activities, the companies
associated with the names of lost, Densmore, and the Smith
Brothers were included. In addition, the Monarch
Typewriter Company was part of the Union Typewriter Company
combination.

In 1903, the Remington Typewriter Company separated
from Union Typewriter Company. In 1924 the Reminqton
Typewriter Company acquired the Noiseless Typewriter
Company. In 1927, a merger between the Rand Company which
bad developed office filinq and information storage and
retrieval systems, took place to result in the Remington
Band Company. In 1955, Remington Rand merqod with the
Sperry Gyroscope Company to form the Sperry Band Company.

162

The Berger history of the five companies to some
extent conforms to a qeneral pattern of Bergers in the
United States. The formation of Onion Typewriter Company
in 1893 was a part of the general major merger movement of
the turn of the century. In general, the major movement at
the turn of the century combined local and regional
companies into national ones. In addition, it resulted in
the combining of companies which previously had been in
bitter competition to the point of •’sales wars.” But unlike
some of the mergers at the turn of the century, the
* formation of Union Typewriter Company did not result in
market control.

The next major merger activity took place in the mid
1920’s. One of the objectives of mergers occurring at that
time was to round out product lines for increasing the
effectiveness of marketing and advertising programs. The
merqers between typewriter companies and office machine and
office filing companies also represented this type of
merger objective.

The mergers in the post World War II period in the
D.S. have been merqers for diversification. Efforts have
been made to enter industries that provided needed growth,
stability, or a breadth of technological capability. In a
number of them, mergers may well be described as mergers
for survival. Aqain, the same influences were operative in
the typewriter industry.

These major merqer episodes were characterized by a
nunher of fundamental developments in the natore of the
typewriter. At the turn of the century, the front strike,
which provided increased visibility for the operator, was
an important improvement. The early 1920's saw the
introduction of the portable typewriter. In addition, the
principles of the noiseless typewriter were put into
effective operation at that time.

A great technological innovation was the beginning of
the electric typewriter in the 1930»s. Then in the

w m

post-war period came the dominance of the electric
typewriter, its relation to other data processinq systems,
and the technological explosion in electro-mechanical
systems and electronics, generally.

C. nancial Jerms of the Bergers of the Fou r flajor
Typewr iter Com panies

Over the years, SCH has had an active merger history.
Two of the most important mergers as far as the typewriter
industry was concerned were the mergers of L.C. Smith and
Corona in 1926 and the merger of Smith and Corona with
Harchant in 1958. Table VII-3 and Figures YII-1 through
TII-5 present data on SCH. It has already been stated that
the 1926 merqcr of L.C. Smith and Corona waa to fill out
the product line of the company. Unfortunately, as the

16 k

TABLE VU-3

FIHAHCIAL TBEKS 0? VARIOUS SCM MERCIES

1. L.C. Smith -- Corona (1925 incorporated)

Tents: Data not available

Data: (For 192k)

_ L.C. Smith _ _ Corona _

llet Income $284,118 Earnings before $306,0o0

Interest and taxes

# of shares 19,065 30,000

outstanding

2. Smith-Corona — Marchant (June 26 , 1958)

Terms: (l) Marchant common holders received 1 r share of SCM
common for each share held.

Per Share Data:

Smith-Corona Marchant

Dividends
per share

1956

$1.80

1957

$1.00

1956 1957

stock dividends

Earnings
per share

5.09

4.27

$0.90

$3.27

Humber of
•hares of

common

423,132

341,147

622,767

589,270

Source: Moody's Industrie! Survey, 1920, 1959.

l«5

table demonstrates, data was scarce. It appears that the
cocpani.es were fairly equal in size though there is no
actual inforcation on the exact teres of the merger. The
aain emphasis, however, was to combine a company — L.C.
Smith — which had a good standard manual machine with a
company — Corona — which had a good portable machine.

The second important merger of Smith Corona was with
Harchant in 1958. With diversification in mind one of the
first areas that a typewriter company would turn to would
be other office equipment. By examining the same tables
* one observes that Smith-Corona was considerably larger than
Harchant. The holders of Harchant common stock received
1.25 shares of SCN common for each share held. At the time
of the merqet Harchant had a price earnings ratio of 29.4
compared to a price earnings ratio of 3.6 for Smith-Corona.
The price earninqs ratio for the Dow Jones Industrial
average at that time was 16.3. One observes that
Harchant's P/E ratio was substantially above both

Smith-Corona and the Dow Jones average. With such a high

ratio one could conclude that investors felt that Harchant
had good growth potential. At the time of the merger
Harchant had a book value of $13 million. Smith-Corona
paid approximately $20 million for Harchant which would

lead one to believe that Smith-Corona thought that a merger
with Harchant would be helpful in reversing a declining

trend in sales and profits.

166

This serger demonstrated another typewriter fire's
desire to deversify into a broader product line. Instead
of the fire being solely in the typewriter industry SCB was
now in the office equipment industry.

Table VII-7 presents a comparison of the book value
and actual purchase price for each of the major mergers of
the traditional typewriter manufacturers for the period
1930-1965. Data is presented in chronological order. 4
discussion of each merger is provided in the text.

The Underwood Company, like SCH, underwent two
* mergers. The first was with Elliot-Fisher in 1928.
Elliot-Fisher was a large manufacturer of typewriters as
was Underwood. Like other typewriter mergers in the 1920's
this primarily was a merger that rounded out the product
lines. Looking at the data on Table VII-4 one observes
that the asset size of Underwood was much greater than
Elliot-Fisher, but that Elliot-Fisher had a larger amount
of net income. This in part reflects the higher Earnings
per Share for Elliot-Fisher. Unfortunately not enough data
was available for further analysis.

The merger in 1963 with Olivetti was a clear case of
one company "bailing out" another. Underwood was in
serious financial trouble as the data in Table VII-4 and
figures VII-1 through VII-5 show. Olivetti, wanted to
nerqe with a U.S. firm that possessed a larqe marketing and
distribution system so that Olivetti could better penetrate

1*7

TABLE VII-4

FINANCIAL TERMS OF VARIOUS OLIVETTI -UNDERVOOD MERGERS

X. Undervood — Elllot-Fisher (January 1928)

Terms: (l) Exchange 1 share of Undervood-Elllot Fisher
series B $7 cumulative preferred for 1 share
of Elliot Fisher 1 % preferred.

(2) Seven shares of common of nev corporation

for X share of Elllot-Fisher common stock of
either class.

Beta: 1927

Undervood

Elliot-Fisher

Net Income

Assets’ 3

E.P.S.

Preferred

Common

$2, 403, 993
32,627,518

$72.84

5-^3

$3,973,672

9,765,677

$98.37

5 - 5 *

2. Olivetti-Undervood (1963)

(1) As of December 31, 1962, Olivetti had 65. of the stock of
Undervood.

(2) Olivetti purchased the rest of the company with cash in 1963.

(•) Earnings per Share
(b) Total Assets

Source: Moody’s Industrial Survey , 1929, 1964.

168

the O.S. aarket. In 1961 Olivetti had 65.5 percent of the
stock of Underwood that it had previously purchased. In
1963, when Olivetti aerged with Underwood, it paid
approximately $100 aillion to buy Underwood. At the tine
of the Berger, Underwood»s took value was almost negative.
Thus, as aentioned previously, the priaary reason for
Olivetti paying such a large sua was for the purpose of
baying a firm that possessed a large aarketing and
distribution organization in the United States.

It is iaportant to note that up to this point one has
* seen two foraer powerful typewriter companies merge into
large diversified organizations which virtually eliminates
then froa the typewriter industry.

The aerger history of Royal was confined to two
aergers. The first was in 1959 with HcBee and then in 1965
Boyal was taken over by Litton Industries. HcBee was a
aanufacturer of special office equipment and office
machines, filing and housing equipment for accounting firms
and records and specialized printed products used in
accounting statistics and qeneral record keeping. Boyal,
like other typewriter firms, was interested in diversifying
into the broader office equipment industry. From the data
in Table VII-5, one observes that Royal was considerably
larqer than HcBee. For every share of HcBee cannon held
the holders received 7/8 of a share in Boyal.

At the tine of the aerger, RcBee's book value was

TABLE VH-5

JXNAKCIAL TrEMS OF VARIOUS ROYAL MEF-GIP.S

I. Litton Industries — Royal-McBee (February 1965)

Terns:

(1) Litton issued 201,373 shares of Series A preferred
stock.

( 2 ) Litton had previously acquired kv£ of Royal in a cash
transaction.

(3) Holders of each share of 4-l/2^ series A preferred
received one share of Litton $3 cumulative
eonvertable preferred. Series A.

w Holders of each common share received 0.16875 shares
of Litton Series A preferred.

(5) Royal’s eonvertable subordinate deb. 6 - l/ks, 1977

were redeemed Dec. 1, 196 k and the 5> Series B, 5-1/2*
Series C and 6 J Series D preferred stock were
redeemed October 31, 1964.

Bata:

Litton Royal-KcBee

E.P.S.

Price

E.P.S.

Price

yr. end
7-31

1964

♦2.77

79.6-58.2

$1.04

16 . 8 - 11.1

1963

2.29

86.7-51.5

.72

12.5- 8.8

1962

1.64

74.5-37.3

.94

14.8- 7.2

1961

I .09

78.9-41.5

(.92)

19.4-10.4

i 960

0.82

44.9-26.8

.28

21.4-11.8

Humber of shares outstanding

July 31# 1964 — 10 , 508,365 July 31,1963 — 1,538,090

2. Royal — McBee (July 31, 195*0

Terms: (l) McBee preferred exchanged share for share for new
preferred series with same dividend rate.

(2) McBee common exchanged at a rate of 7/8 share of
new common for each share held.

1?0

TABLE VII-5, continued

Data:

Royal KeBee

a b

E.P.S.

Price

D.P.S.

E.P.S.

Price

D.P.S.

1953

$2.32

$22.4-14.5

$1.75

$1.44

$10.5-8.75

$ 0.62

195R

2.62

24.2-19.1

2.00

1.32

10.5-8.9

.45

1951

3.88

26.1-20.4

2.00

1 . 6 o

10.4-7.4

• 55

1950

3.39

23 . 0 - 18.0

2.00

1.43

11 . 8 - 7.2

• 52

(a) Earnlrwr* per Shsre

(b) Dividends per Sharo

Source: Moody's Industrial Survey, 1966 , 1955.

171

$4.7 aillion. Osinq average aarket prices for the year,
Boyal paid $5.3 aillion for HcBee.This fiqure is very close
to the book value of HcBee, and the difference could be
contributed to the use of average market prices. In 1954
HcBee had a Price/Earninqs ratio of 5.2 compared to a P/E
ratio of 9.6 for Royal and 12.0 for the Dow Jones
Industrial Averaqe. Both firos were below the average,
which night indicate that investors were not optimistic
about the qrowth potential of either fin. After tha
aerqer, Boyal was no lonqer solely a aanufacturer of
typewriters but was now part of the office equipment
industry.

By the tine Litton acquired Royal, the net income of
the company had becoae quite unstable. This is also
evidenced in the earnings per share data for Royal. In
1965 Boyal had a Price/Earninqs ratio of 13 compared to a
P/E ratio of 20 for Litton and 19.7 for the Dow Jones
Industrial Averaqe. As evidenced by this data, the aerqer
of the two firas combined one firm with qood qrowth

potential and one that had sales and earnings instability.
Boyal had a book value of $40 aillion. Litton issued
201,373 shares of Series A preferred for the purchase of
Boyal at an averaqe price of $125. This amounted to $23.2

Billion for the coapany. Litton had already acquired 41

percent of the stock of Boyal in previous cash

transactions. Thus, Litton purchased Royal for an aaount

172

equal to the book value of Boyal.

As a large diversified corporation Litton wanted to
■ove into the office equipment industry. Unfortunately
Royal was technologically far behind in the development of
an electric typewriter. And as a result, technological
deficiencies are the basic problems facing Litton and Royal
at the present time. With the merger of Royal and Litton
in 1965, the typewriter industry virtually disappeared as
an independent entity.

The Remington Typewriter Company went throuqh two
* significant mergers. The first was in 1927 when Remington
Typewriter Company merged with Rand-Kardex-Bureau. Rand
nanufactured and distributed visible recordinq equipment,
index systems and filinq cabinets. Data on the companies
at this time was scarce. Asset size figures are qiven in
Table VII-6. Remington was the largest of the two with a
book value of $30 million compared to $20 million for Rand.
However, the Price/Earninqs ratio was 11.4 for Rand
compared to 5.5 for Reminqton -- nearly twice as large.
Data was unavailable to compare these figures to the Dow
Jones Industrial Average.

This was basically a merger of two firms of equal
size. It was the first in a series of mergers that would
combine typewriter firms with office equipment firms.

Then in 1955 Remington-Rand merged with the Sperry
Corporation which produced a variety of speciality designed

173

TABLE VH-6

FINANCIAL TEEMS OF VARIOUS SPERRY-RAND MERGERS

Remington

ter Co. — Rand Kardex Bureau (Jan. 25, 1927

1 15/100 share of Remington Rand 1st preferred
for each share of Remington 1st preferred.

1 15/100 share of Remington Rand 2nd preferred
for each share of Remington 2nd preferred.

4-1/2 shares of Remington Rand common for each
share of Remington common.

1 share of Remington Rand 1st preferred for
each share of Rand 7> preferred.

2 shares of Remington Rand common for each share
of Rand common held.

Total Assets as of December 1926

Terms:

(2) 3-1/4 shares of common of Sperry-Rand for each
share of Sperry common held.

(3) 2 shares of common of Sperry-Rand for each
share of Remington-Rand common held.

Bata: (For the year 1955)

Reoington-Rand Sperry Corp.

B.P.S.

D.P.S.

Price Range of
Common
Humber of
Shares of
Cocmon

58.9-31.25

5 , 163,523

*45.9-34.5

4,343,590

Source: Moody*!) Industrial Survey, 1928, 1956.

TABLE VII-7

TERMS OF PURCHASE FOR POST 1930 MERGERS

1954

1955

1958

1963

1965

Royal Purchases McBee

Book Value of McBee

Market Price paid for McBee

Remington-Rand and Sperry Merge

Book Value of Remington-Rand

Book Value of Sperry

Price paid in excess of Book
for Remington-Rand

Price paid in excess of Book
for Sperry

Smith-Corona mergers with Marchant

Book Value of Marchant

Price paid for Marchant

Olivetti purchases Underwood

Book Value of Underwood

Price paid for Underwood

By 1961 Olivetti had 65.5%
of the stock

Litton purchases Royal-McBee
Book Value of Royal
Price paid for Royal
Litton had 41% of the stock

$ 4.7 million
$ 5.3 million

$ 97 million

$ 243 million

$ 153 million

$ 141 million

$ 13 million

$ 20 million

$ 47,000
$ 100 million

$ 40 million
$23.2 million

175

and patented instruments for aeronautical, naval,
industrial and agricultural application.

In terns of sales, total assets and net incone Sperry
Corporation was larger than Benington-Rand. This is also
verified by the per share data. The book value of Sperry
was $234 aillion compared to $97 aillion for
Henington-Rand. The terms of the nerger were such that
Sperry was paid $141 aillion above book value while
Benington-Rand received $153 million above book value.
Beaington had a Price/Earnings ratio of 12.5 compared to a
P/E ratio of 6 for Sperry and 14.1 for the Dow Jones
Industrial Average. The high P/E ratio perhaps in part
explaines the reason for Remington-Rand getting a higher
amount in excess of book value than Sperry Corporation.

This was the first non-related product
diversification nove aade by a typewriter company.
Following the fornation of Sperry-Rand each of the other
typewriter companies merged vith a corporation or
corporations that were also in non-related product lines.

Thus each of the typewriter companies underwent a
series of mergers that eventually led them to a corporate
structure that results in nono of then remaining as a sole
aanufacturer of typewriters.

D. .financial Histories oj fouj fiajof lingwriter Companies

These chanqes, alonq vith economic fluctuations in
the economy as a whole, are reflected in the financial
histories of each of the individual companies. In the
following five figures, some salient features of the
financial history of the four typewriter companies, which
were the main specialized typewriter companies in the
industry, are traced. Fiqures VII-1 through VII-5 show the
relationships of sales, total assets, net income, net worth
and the rate of return on investment over time for each of
the four companies. Sales data are taken at the retail
level, net income is defined as earnings after taxes and
net worth is defined as the combination of the accounts of
capital stock, capital surplus and retained earninqs. In
the Appendix,Data Table VII-1 presents data on Remington
Band and its successor companies. Data are presented on
sales, total assets, net income, net worth and the ratio of
net income to net worth. Compound annual qrowth rates are
calculated for specific time segments. The first time
sequent covers most of the 1930's. This period was
dominated by the qeneral recession in the early part of the
decade and relatively slow growth rates in the second part.
Growth rates for Reminqton Rand during this period were
actually neqative. The fifteen year period starting in
1940 was a period of relatively favorable growth,
approximating 12 1/2 percent to 13 percent in each of the
categories. This strong performance was the basis for

FIGURE VII-1

SALES PATTERN'S OF THE FOUR
TRADITIONAL TYPEWRITER COMPANIES
(Dollar Araounts in Millions)

FIGURE VII-1
(Continued)

(*) This symbol refers to the time of a major acquisition

1954 Royal purchases McBee

1955 Remington-Rand and Sperry Merge
1958 SCM purchases Marchant

This symbol is used in Figures VII-1 through VII-5
and refers to the above mergers.

179

180

FIGURE VII-2
(continued)

(a) Data was negative in these years

181

182

riGURE VII-3

NET INCOME PATTERNS OF THE FOUR
TRADITIONAL TYPEWRITER COMPANIES
(Dollar Amounts in Millions)

184

r igur vi 1-5

RATE or RETURN PATTERNS OP THE TOUR

merger under farorable teres with the Sperry Gyroscope
Company. Subsequent growth rates continued to be at about
the same rate as the economy as a whole except for net
income, for which there was virtually no growth during the
decade following the Sperry Rand merger.

Data Table TII-2 in the Appendix presents a similar
history for L.C. Smith and the Smith-Corona Companies. The
decade of the 30's was characterized by negative growth
rates. Tor the eleven years ending in 1951, growth rates
were above 10 percent. For the four year period, 1952
through 1956, growth rates were sharply reduced. In 1956
the merger with the Harchant Company took place followed by
a heightened diversification program.

The Underwood Company had a very successful
typewriter and was a strong element in the industry up to
the 1920's. Again, its performance for the decade of the
1930's represented negative growth rates in most
categories. Like the other companies Underwood experienced
positive growth rates in some of the financial categories,
but experienced a negative growth rate in earnings during
the fifteen year period between 1990 and the immediate
post-war period. In fact the Underwood Typewriter Company
did not experience a positive growth rate in net income in
any of the five time periods for which growth rates and net
income were calculated. Its net income performance peaked
in 1929 when the company earned a net income of over $7

185

■illion. Underwood did not reach a level of earnings as
high as the $7 aillion achieved in 1929 in any following
year. Its sales continued to grow over the long period of
years beginning in 1933 for which sales were given.
Indeed, in the last year of its operation as an independent
coapany in 1962, its sales reached approximately $100
aillion. However, on sales of $100 million, it experienced
a loss of over $8 aillion. Its aost disastrous year was in
1960 when, on sales of some $79 millions, it suffered a
loss of $26 aillion, representing about a third of sales
'and 160 percent of its net worth in 1960.

The Royal Typewriter Company was also strong in the
early years. It was one of the few companies which
experienced a positive growth in sales and net income
during the decade of the 30's. Its growth during the
fourteen year period between 1990 and 1954, however, was
strong in all categories except net income for which
virtually no growth was experienced. After the merger with
HcBee and through 1964, before the acguisition by Litton
Industries, the Royal Typewriter Company experienced growth
at about half the rate of Gross National Product, and both
its sales and total assets suffered a downward trend in net
income amounting to an average compounded of about 7
percent decline per annum.

E. IIPJfitabiJLity Per|pjcaacce of ihe Hajor Upewsltep

186

TABLE VII- 8

PROFIT RATE OH EQUITY (AFTER INCOME TAXES) FOR THE
POUR DOMINANT FIRMS.IN THE TYPEWRITER INDUSTRY

Realngton-Rand

Royal

Underwood

L.C. Smith

2.8
7.7 (b)
9 >)
N. A.

1925-29

11.3

7.4

1930-34

1.9

1.5

6.2

(4.6)

1932-36

9.1

8.4

1936-40

15.5

23.9

14.6

8.9

1947-51

22.7

21.7

14.4

13.0

1952-56

l4.8< d)
11*5
( .4)

6.8

1957-61 1962-66

2.7 4.4^

( 58 * 6 ) ---

>) 7 . 8 oo

Average

1.4 m 6.1

(I8.6) (s)

(unweighted)

(a) 1923-1925

6.7

8.7

1.0

4.5

15.7

18.0

8.2

(b) 1924-1925

(d) 1952-1955

(e) 1962-1964

(f) Without Underwood

(g) Includes Underwood

(h) For 3CM Corporation

Source: (1936-40, 1947-51) Bain, Joe S., Barriers to New Competition (Cambridge: Harvard University
Press, 1956 ) p. 192.

All other year 3 , Moody's Industrial Survi

Coapanies

The financial patterns of the four aajor typewriter
coapani.es in the D.S. are nirrored also in the
profitability rates by five-year intervals. These data are
presented in Table VII-8. Durinq the years 1936-1940, the
profit rate averaqed 15.7 percent.' Durinq the period
19*7-1951, the profit rate for the four companies averaqed
18 percent. These were very stronq and favorable
profitability records.*

It is interestinq to note from Table VII-8 that these
hiqh levels of profitability had never been achieved prior
to the two tine seqmonts cited, nor subsequent to these two
tine seqaents. Even durinq the relatively prosperous years
of the 1920's, for the two five-year intervals of the
decade of the 1920's, the profit rates were respectively
6.7 percent and 8.7 percent on net worth. The
profitability record, particularly for the late 1950's, was
unfavorable for all coapanies and particularly disastrous
for Underwood.

The deterioration in the profitability of the
old-line typewriter coapanies has another aspect of
siqnificance. The foreqoinq data on the financial
performance of the coapanies and the qrowth rates durinq
the post World War II period pernits a siqnificant
generalization. When the profitability of the old-line

188

typewriter companies declined after the early 1950*s, for
every coapany a meaningful time seqaent in the period under
analysis, the qrowth and sales of these companies was not
Batched by the growth in their investaent in total assets
or their additions to net worth- When profitability was
aore favorable, the increase in investaent in total assets
and in net worth kept pace with the increase in sales
wolnae.

A related piece of evidence in this regard was the
increase in earned surplus of 3.76 percent and the increase
in qross land, plant and equipment of 2.86 percent in the
sinqle year between 1938 and 1939, when profitability
levels were relatively high. 1

P. Diversification Eff orts by Typew riter C omp a nies

The profit performance referred to in the previous
section reflected the major impacts of the qrovth of
electric typewriter sales. The rise of the electric
typewriter, its relationship as part of a total information
processing system, and the development of the data
processing industry, all had a major part in the
diversification planning and strategy of four leading U.S.
firas in the typewriter industry.

A series of articles reviewed the decline of
Dnderwood. An article in fojrbos of April 1, 1959,

189

commented as follows:

Three successive lanaqeaeots and five years
of troubles at typewriter-making Underwood
Corporation have produced a now familiar pattern:
constantly hopeful predictions, steadily worse
results. Last aonth was no exception. Closing
its books on 1953, Underwood showed still another
S7.1 aillion deficit on top of the $8 aillion in
losses piled up in 1956 and 1957.*

Two years later Underwood was still hawing problems.
Another Forbe s article had the following dramatic title,
"Hy Bane was Underwood—Gaze on ay Fate, ye Corporate
Highty, and take Heed!" 5 The Forbes article and an earlier
article in Fortune Magazine analyzed, "What Kent Wrong at
Underwood." 6 One otserration made was that while other
business aachine companies had an opportunity to learn an
advanced technology during the war period, Underwood
■anufactured rifles and thus had little contact with the
new technology that was appearing. When Underwood
atteapted to enter the electric typewriter business in the
1950's, "IBn Had all but Put a Lock on the Door." 7
Underwood atteapted to enter the computer industry in 1956,
bnt after spending 18 aonths and $12 aillion, it scrapped
the project without having achieved a single marketable
product.

Olivetti obtained control in 1959 and was interested
in Underwood in part for soae of its products, but aainly
for its aarketing organization in the u.S. Lack of an
effective aarketing organization Bakes it difficult for a

190

foreiqn firm to make significant penetration in the United
States market. As discussed in detain in Chapter IV, in
dealing with aarketing and distribution systems in the
typewriter industry, it was indicated that to attempt to
establish a nationwide marketing and service organization
by a foreign typewriter company involved tremendous outlays
with tremendous risks. Olivetti felt that these great
risks could be avoided by taking over the Underwood
Coapany.

However, the costs of attempting to achieve a
break-even with the Underwood products and effective
utilization of the Underwood U.S. marketing organization
turned out to be in excess of $100 million. Thus, the cost
of attempting to achieve a national aarketing and service
organization in the U.S. by a foreign company by merger,
turned out to be of the same order of expense as it would
have been to attempt to achieve the same thing de novo.
The financial burden on Olivetti was so great that the
Olivetti family subsequently lost control of the company.*

The experience of the Underwood Coapany was
paralleled by the other three companies. The problems of
the Royal Typewriter Company were discussed in a 1955
article in Forbes.* The initial problems of Smith-Corona
were discussed shortly after the merger with flarchant. 10
These problems were swamped in part by an extensive
diversification and acquisition program outlined in Table

191

YII-9. Study of the Beminqton-Rand Corporation was
soaewhat obscured by its favorable profitability record
qoinq into the aerqer with the Sperry Gyroscope Company.
Analysts looked with favor on the Sperry Rand aerqer.**
After analyzinq aspects of the Berger, the Fort une article
connented on the acquisition by Remington Rand of the
Eckert Bauchly Coaputer Company in 1951, five years after
Eckert and Bauchly had completed their ENIAC, a giant
calculator built for Army Ordnance. The first E-B ONIVAC
(Dniversal Automatic Computer) was delivered to the Bureau
* of the Census in 1951. The Fortune article enthused in
closinq as follows.

If, on the other hand, the combination of
Sperry technology and Remington Rand

merchandising sparks a burst of new progress in
the development of electronic tools for
businessmen, then the replacement of one qiant
corporation for two very biq ones can be easily
•justified.**

However, the Sperry Rand Corporation in both the
typewriter business and the data processing field, went
tbrouqh some tryinq years. It reached a low ebb of less
than 4 percent return on net worth in 1963, but made some
recovery since then, until it achieved a return of 11.35
percent on net worth in 1967.

G. Ililua tion of-Divers ific ation Ef forts of the T ype wr iter
Compa nies

TABLE VII-9

CAPSULE HISTORY OF SCM CORPORATION

1885

1886

1887

1890

1893

1900

1903

1909

1910

1903

1914

1915
1920

1926

1933

Inventor Alexander Brovn interests gun-makers Lyman and Wilbert
Smith in backing the development of an improved typewriter.

The Smith brothers introduce a typewriter that writes in upper
and lower case letters.

Smith-Premier Typewriter Company formed by the Smiths.

Offices accept the typewriter.

Smith-Premier merges with four other typewriter makers to farm
the Union Typewriter Company. Smiths became executives. Smith-
Premier retained as brand name.

A visible typewriter invented that lets the typist see what is
being typed; previously, all typewriters wrote in such a vgy
that typing couldn't be seen.

Smith Brothers resign from Union Typewriter Company in a dispute
over producing a visible typewriter. They organize the L.C.Smith
and Brothers Company, produce two visible models, and introduce
such staples as two-color ribbon, built-in tabulators, stencil
cut, and interchangeable platens.

The Standard Typewriter Company is organized to make a portable,
the 6-pound Folding Bar Visible.

Standard introduces its second model, calls i the Corona.

Merchant Brothers make the first American calculators in Oakland,

California.

Marchant incorporates, builds a factory.

Standard Typewriter changes its name to Corona Typewriter Company

Marchant develops the first electric calculator.

Marchant Introduces first full-keyboard calculator. Chief
engineer is Carl Friden, who later made a well known calculator
bearing his name.

L.C. Smith and Corona Typewriter Companies merge. Corona lead,
in sales of portables; L. C. Smith in office typewriters.

Merchant introduces the quiet planetar (or continuous motion)
calculator mechanism.

193

TABLE VII-9 , Continued
CAPSULE HISTORY OF SCM CORPORATION

19^5 Bnerson Mead, 29, organizes his own company. Mead Manufacturing.

19^9 Mead sells his company, joins Kleinschmidt Laboratories.

1956 Smith-Corona acquires Kleinschmidt Labs, and Emerson Mead.

1958 Smith-Corona buys Miller-Bryant-Pierce (ribbons and carbons),
British Typewriters, Ltd., and Marchant Calculators. Smith-
Corona-Marchant incorporates; sales for year are $87 million.
Starts to sell wet copiers.

i 960 Bnerson Mead is elected president of Smith-Corona-Marchant, Inc.
Sales:$93 million.

* 1961 Sells Miller-Bryant-Pierce to Columbia Ribbon and Carbon. Enters
the data processing field with TVpetronic line of small scale
equipment. Buys the St. Louis Microstatic Company (electrostatic
copiers). Enters into a cooperative agreement with the Diehl
Calculator Company of West Germany.

1962 Changes its name to SCM Corporation. Sells its first
electrostatic copiers. Sales: $103 million.

1965 Sales: $200 million. Claims Ho. 2 spot in copiers.

1966 SCM buys Proctor-Silex (appliances), Proctor and Schwartz, and
L. and V. Machine.

1967 Purchases Shetland (floor polishers, scrubbers) and Lewyt
(vacuum cleaners). Merges with Gliaden Company (paints, chemicals,
and food.) Acquires Allied Paper (printing and copier papers).
Sales: $705 million.

1 968 Disposes of data pirocessing operation to Control Data. Sales for

fiscal 1968 : $ 7^5 million.

1969 Sales goal: $900 million.

Source

"SCM Calculates Its Future,
November 1968, p. k$.

Modern Office Procedures

The pattern of diversification strategy of the
typewriter companies followed a similar pattern among all
four of the coapanies. The nature of this pattern of
diversification has been summarized in the following terns
by a foraer research economist with Stanford Research
Institute after extensive study of - diversification patterns
of coapanies in a number of industries in the post-war
period.

During the 1950's, most of the major firms
in the typewriter and office machines industry
fully recognized the trend toward automation of
information handling—especially as it related to
the use of electronic computers. They concluded
that their major role in the economy was that of
information technology—that their real strength
was in selling sophisticated hardware to business
firms through a well developed and highly skilled
sales force. They were wrong, not because they
weren't in fact in the business of selling
equipment used in processing information, but
rather because they failed to identify their
major marketing and technical strengths.

Growth aspirations were being thwarted by
lower cost foreiqn made machines in the portable
typewriter field and by the IBM electric in the
standard model. They countered both by aoving
production abroad and by introducing electrics of
their own, but these moves came tco late. To
meet qrowth aspirations they all decided to
div ersify—but in what direction? Doth Koyal and
Underwood decided to move into the computer field
where RCA, IBM, Burroughs and Remington Rand wore
already well entrenched. The reasoning went
something like this. Our industry is moving
toward a systems approach to information
processing. If we are to survive and grow, w<«
should offer a complete line of equipment. Tim
typewriter is destined to be but a small part of
this total system so we should diversify into tho

195

qrowing parts of this information technology
industry. Horeover, since the computer will be
central in these new systeas and its sale will
control the sale of peripheral equipment, we
should have our own computer system to protect
sales of other items of equipaent we already
produce.

Existing marketing strengths were
considered highly relevant to- the selling of
information systems. They were not. The people
within a firm who buy typewriters and small
office nachines are not the same as those who buy
coaputer systems. The typewriter firms had
little experience in selling to scientists,
engineers and operations analysts whose
recommendations are weighted heavily in the
decision to buy a particular coaputer system.
Thus, there was very little, if any synergy to be
obtained in sellinq computer systems. It is one
thinq to sell a typewriter to an office manager
upon a secretary's recommendation. It is
something totally different to sell a computer
system to a cost accountant responsible for
developing decision making information for
■anageaent.

As it turned out, the marketing strength
which the typewriter firms thought they had in a
hiqhly skilled sales force was no strength at all
in terms of total information systeas. That was
mistak e number one.

The second major mistake in designing a
diversification strategy was that of concluding
that, because they had skill in cakinq small
precision parts and assembling them into complex
electromechanical devices, they could make the
additional step into electronic circuitry desiqn
with relative ease. When I say relative ease, I
mean with sufficient ease so as to be able to
desiqn a computer and sell it at a profit.

Since they did not have the electronics and
design skill they decided to acquire it.

19 6

■oyal-HcBee entered a joint venture with General
Precision and Underwood acquired Electronic
Computer Corporation. Both organizations qreatly
underestimated the costs of continuing research
and development expenditures required to stay in
the computer industry, both firms saw their
accumulated earned surplus beinq eroded away by
heavy 8 6 D expenditures, and by 1965, both firms
had disappeared a separable corporate
identities. 13

In the foreqoinq analysis. Professor Hason is arquinq
that the typewriter companies faced a difficult dilemma.
The strenqth of the manual typewriter companies was in
their marketing and service organizations for manual
typewriters that had been technoloqically by-passed and had
moved into the declininq phase of the life cycle of their
sales, attempts to apply the marketinq orqani 2 ation to the
broader area of information systems was not a comparative
advantaqe, but rather a comparative deficiency in competinq
with the marketinq and service organizations developed by
companies with a stronqer technological base.

i second error common to many companies in attempting
to diversify into the electronic data processing field was
failure to understand the tremendous costs of developing a
marketable computer and failure to recognize that a
separate sales and service organization would be required
to achieve an effective distribution system for computers.
This latter problem was similar to that faced by foreign
typewriter companies in attempting to enter tho O.S.

197

■arket. For effective market coverage, a nationwide
■arketinq and service organization was required. Put
without sales in larqe volume throughout the country, the
per unit cost of research and developnent and the requisite
■arketinq and service organization sake the resulting
product price so high as to be non-competitive, or at
competitive prices resulted in serious losses.

As a consequence of the iapact of technological
chanqe and the innovation of the electric typewriter and
the resulting narket developments, the effects on the
* traditional typewriter conpanies were severe. As a result,
none of the oriqinal "pure typewriter companies" in the
United States have survived as an independent company.
Thus, the U.S. typewriter industry as it existed even 15
years aqo has disappeared. The manufacturing of portable
typewriters, while still conducted by American companies,
has been shifted to a considerable degree to foreiqn
subsidiaries. Local manufacturing operations are carried
on as relatively small divisions of larqe diversified
companies. This is the threshhold that has been reached.
In the following chapter, an assessment of the educational
■arket for typewriters is made.

198

FOOTNO TES TO C HAPTER VII

1. Brace B liv en. The Wonde rful Writing Machine (New lork:
Random House, 1954) p. 95.

2. Similarly hiqh returns were found in the Federal Trade
Commission study of 1941. For 1939, the average return for
10 companies was 11.8 percent on average net worth employed
for the year. The ranqe of returns was from 6.1 percent to
36.9 percent with four of the companies earning 15.6, 16.1,
19.6, and 36.9 percent respectively. Six of the companies
earned returns ranging from 6.1 percent to 10.3 percent.
See, U.S. Federal Trade Commission, Ind ustrial Corporation
Reports : Business Machines and Xipewriper Manufacturing

Corporati ons (Washington, D.C.: Government Printing Office,
' February 25, 1941) p. 5.

3. Federal Trade Commission, Industrial Corporation
Reports. Business Machines and Typewriter Manufacturing
Corporations, February 25, 1941, pp. 9-10.

4 . "That Corner Again," Forbes. Vol. 83 (April 1, 1959) p.
40 .

5. Forbes . Vol. 92 (July 1, 1963) p. 15.

6. Fortune . September, 1960, p. 141ff.

7. forb es. July 1, 1963, op. cit., p. 15.

8. Walker Gu 2 zardi Jr., "Olivetti’s Crisis of Identity,"
ZStifl-DS ( July 1967) pp. 92ff. This article was a more
sober appraisal of Olivetti’s prospects, following by seven
years an earlier article entitled, "Olivetti: Elegant and
Tough," Fortune (September 1960) pp. 137£f.

9. "Royal Road," Eorbes, Vol. 76 (November 15, 1955) p.

30 .

199

10. "Costly Herqer," Forbes. Vol. 82 (October 1, 1958) p.

25.

11. Edaund L. Van Deusen, "The 2- Plus 2 of Sperry Hand,"
Fortune (Auqust 1955) pp. 88ff.

12. Ibid .. p. 128

13. R. Hal Hason, Hineoqraphed Lecture on Diversification
ot OCLA Executive Proqraa, Sprinq 1968, pp. 23-25.

200

APPEKDIX VII-I

R.C. Allen

Still manufacturers typewriters.

Corona

Merged with L.C. Smith, 1926.

Densnore

Formed with Onion Typewriter in 1893. Taken over by
American Vritinq Hachine Company in 1907. Dropped by that
‘organization in 1910 and disappeared by 1912.

Elliot-Fisher 1903-1928

Merged with Underwood in 1928.

Hammond 1P80-1923

Was a successful producer of typewriters up to 1923. How
it is known as the Var-Typer (an electric machine used to
sct up copy to be reproduced by photolitho graphic process.

Keystone 1899-|903

ncrqed with Elliot-Fishcr in 1903.
{Jonarch

Formed with Union Typewriter Company in 1693. Sold by
nonarch Typewriter Company in 1908. Ceased operations
before World War I.

RoiseJess

201

Purchased by Reminqton in 1924.

Re ming ton 1874- present

Still exists as part of Sperry Band.

B oyal 1904-'present

Still exists as part of Litton Industries.

L.C. Smith

Still exists as part of SCR.

Smith Pr emi er

Part of L.C. Smith.

Underwood 1895 - present

Still exists as part of Olivetti-Underwood.

Y ost 1079-1918

Formed Union Typewriter Company in 1893. fiy the end of
World War I it was no lonqer beinq sold.

202

APPENDIX VII~II

Acae 1911-1915 (approximate)

This typewriter, invented by Zalmon G. Sholes, son of the
faa ous typewriter inventor C. Lathaa Sholes, was first
called the "Waterbury Standard Visible". It retailed for
$50.00.

A lexande r 1907-1914

This typewriter, oriqinally desiqned in 1907 in Endicott,
H.T., was moved from one city to another in the United
States and finally in Enqland where a British munitions
works nanufactured it for a few years. It was a four-bank,
sinqle-shift, liqht weiqht typewriter.

America n 1893-1915

This typewriter, first introduced in 1B93, was also
manufactured in Enqland as the Globe.

A tlas 1915-1917

This typewriter was introduced in 1910 but had a very
• short life. Curinq World War I it went off the market.

Ba rloc k 1914-1926

The Tarlock typewriter was introudced from Great Britain
to the United States in 1914. It is related to the
Columbia, a typewriter company whoso patents were purchased
at the time the Barlock was introduced to the U.S. Its
manufacture was returned to Enqland in 1918.

1910-1915

This little machine
Harrisburq, Pennsylvania.

was first market in 1910 in
It sold for $ IB.00.

203

Blake 1905-1909

This machine, formerly known as the Manhattan, was
manufactured in Newark, Hew Jersey.

Brooks 1887-1912

This machine, manufactured in New York City, was noted for
its stall number of parts and light weight.

Ne w Century 1900- 1906

The full name of this typewriter is New Century Caligraph.
It vas manufactured by the American Writing Machine Company
% j.n Bridgeport, Connecticut.

Chicago 1897-1917

This typewriter was formally known as the Munson. Jt had
48 styles of type available on interchangeable wheels.

Commercial Visible 1907-1915

This 28-key double-shift typewriters was introduced in
1898. It had but 288 parts and was one of the simplest
writing machines ever devised.

gram 1907-1908

This combination writing and adding machine was introduced
in New York. It had a very short life.

Cr anda ll 1879-1899

This machino was manufactured in Groton, N.T. At the time
of its introduction, it was a type wheel typewriter. Later
models had type bars.

204

Crown 1887-1900

This typewriter was manufactured in Albany, N.Y. It had a
word counter as an integral part of the mechanism, and
retailed for 520.00.

Darling 1910-1915

This was a pocket sized toy typewriter. In many markets
in Europe it was sold as the Trebla.

Type-A dder 1920-1925

This was an attachment to a standard typewriter in the
form of an extremely compact adding and subtracting
'machine. It was manufactured in Hew York, N.Y.

Daugherty 1C90-1910 (approximate)

A completely visible typewriter manufactured in Kittaning,
Pennsylvania, that sold with cover for 575.00.

Demountable 1921-1927

This typewriter, with interchangeable frame, carriage and
action, was manufactured in Fond du Lac, Wisconsin.

BPllax 1903-1910

This typewriter was manufactured by Robert Ingersoll S
Brothers. It was one of a series of typewriters for the
use by children as toys. Others in the series carried
names such as Baby Practical, Little Giant, and Simplex.

1895-1900

Hanuf actnred in Dos Floinos, Iowa, the Duplex never
achieved ouch acceptance.

205

Edland 1894-1900

Hanufactured in New York City, the Edland was a wheel-type
aachine.

Slli s 1910-1920

This was a complete adding, billing and partial accounting
aachine. It had a typewriter as well as an adding machine
keyboard.

Emerson 1907-1910

This typewriter had an unusual rotary type bar action. In
1910 it was purchased by Hr. Sears of Sears Roebuck and
‘shortley thereafter became the Woodstock typewriter.

Essex 1890-1900

This partially visible typewriter was manufactured in New
York, N.Y. It had very limited acceptance.

Fay-Sh oles 1905-1908

This blind typewriter was an outgrowth of the
Renington-Sholes. The same Rcminqton was reomvud from the
original name because of court litigation. In 1908 it
became part of the Remington Company.

fe dera l 1919-1923

This typewriter was manufactured by the Federal Adding
Fachino Company who purchased the Yisiqraph Typewriter
Company and the C. Spiro Ranufacturina Company to acquire
manufacturing riqhts. The Federal was sold to the Hauaond
Typewriter Company.

191$ 1895-1905

20 6

This typewriter was manufactured in Sew Tort. It was
introudced in France as the Hurtu and sold in Sermany as
the Knoch.

Fou nta in 1905-1910

This was a low priced typewriter with a typewheel and a
universal keyboard sold by a Sew York department store.

£gx 1902-1921

This typewriter was first introduced as a blind writer anrl
as a visible writinq machine in 1906. Several standard and
portable models were introduced before the typewriter went
off the market.

Fra nklin 1900-1905

This typewriter was manufactured in New York and had a
visible printinq point.

Gail>el2 1919-1923

This typewriter was manufactured in Chicago. It was a
portable nodel veiqhinq only 5 and one-half pounds with
case. The company went into bankruptcy in 1923 and the
Oliver Typewriter Company was appointed as a receiver.

Harris Vi sible 1907-1923

This typewriter was manufactured in Fond du lac, Wisconsin
exclusively for Sears Koehuck. Its name was later chanqed
to Hex and was manufactured by the Demountable Typewriter
Company. The Harris Visible became the Hex in 1914.

Ha rtf ord 1094-1910

This typewriter was introduced as a blind writinq machine
in 1H94. It was underpriced and eventually went into
bankruptcy.

207

Hooven 1912-1927

This automatic typewriter was first introduced as the
Rational automatic. It used the piano roll principle to
achieve automatic typewriter operation. It is generally
considered that this is the forerunner of the Autotypist.

Intern ational 1889-1900

This blind typewriter was introduced by Lucien Crandall
and manufactured in Parish, Sew fork.

Jackson 1898-1910

This typewriter was manufactured by the Jackson Typewriter
Company in Boston. It used an ink pad rather than a
typewriter ribbon.

Jewet t 1892-1910

The oriqinal Jewett was a blind writer. A visible model,
known as the Jewett Visible, was introduced in 1904.

J unio r 1907-1915

This small typewriter, invented by Charles Eennett, was
manufactured in Sew York. In 1915 it was sold and renamed
Dennett for its inventor.

KcCa ll 1898-1910

This wasn an automatic typewriter first manufactured in
Columbus, Ohio and then in Xenia, Ohio. It used a
perforated paper roll as a master for typinq.

1898-1910

This typewriter was manufactured by the flanhattan
Typewriter Company in Now York. It was similar to the

208

Reninqton Bodel 2

Berritt 1899-1905

This typewriter was introduced by the Lyon Banufacturinq
Co®pany of Kew York City. It was desiqned for typinq with
the riqht hand only, the left beinq required for movinq the
printinq indicator to the desired position.

Bolle 1918-1922

This typewriter, manufactured in Antiqo, Wisconsin was
■idway between a portable and an office typewriter. It did
not qain much acceptance and the company went bankrupt in 4
years.

Boon-Hopkins 1911-1921

This addinq-typewriter was introduced by the Boon-Hopkins
Billinq Machine Company. In 1921 it was taken over by
Burrouqhs.

f.orris -890-1895

The florris nachine was introduced in the early 1900’s.
This typewriter, similar to the Hall, was manufactured by
the Hoqqson Banufacturinq Company in Hew Haven and sold for

£15.00.

Bunson 1890-1917

This typewriter was first manufactured in Chicaqo. It was
a typo wheel machine with a universal keyboard. Its name
was later chanqed to the Chicaqo and finally to Galesburq.

JSStien-li I 1889-1900

The national I was an 81 character office size typewriter.
It was manufactured by the National Typewriter Company in
Philadelphia.

209

BicVerson 1907-1907

This unusual typewriter had a vertical cylinder. It was
desiqned in Chicago by a Presbyterian sinister — but never
reached the market.

Odell 1900-1910

This machine, which used an ink pad rather than a
typewriter ribbon for color, had 79 characters and was
operated by hand. It was sold at a price approximately
one-fifth that of a standard typewriter of that era.
Possibly because of this, Odell had a short, unprofitable
life.

* Offici al 1901-1906

This was a typewheel typewriter with a partially visible
printing point. It had a non-standard three bank keyboard.

Oliver 1894-1925

The Oliver typewriter, invented by Rev. Thomas Oliver in
Chicaqo was one of the first that had a visible printing
point. The Oliver enioyed very large sales in the l). S.
until the piddle twenties when, after Oliver's death,
principal marketing efforts transferred to Europe.

Peo ple' s 1893-1897

This typewriter, also known as the Pearl, was manufactured
by the Garvin Kachine Company in Hew York. It was a typo
wheel machine that was operated with one hand on the
keyboard and the other on the indicator to selected the
desired character.

Pit tsh urgh 1898-1913

This typewriter, formerly known as the Daugherty, was
■anuractured by the Pittsburgh Writing Company of
Kittuninq, Pennsylvania. It featured an interchangeable

210

type basket and carriage

Postal 1902-1910

This portable typewriter was manufactured by the Postal
Typewriter Company in Sew York. It was a three bank
keyboard typewriter with a type wheel rather than type
bars.

R apid 1890-1900

The Rapid typewriter, manufactured by the A. W. Sump C
Company , Dayton, Ohio, featured a four bank keyboard, type
bars and a visible printing point.

* Relia nce 1919-1920

The Reliance Typewriter Company was organized after
purchasing the assets of the Pittsburgh Visible Typewriter
Company in 1919. It was sold under several names,
including Wall Street and Broadway Standard.

Rex 1916-1923

This typewriter, manufactured by the Rex Typewriter
Cowpany of Fond-duLac, Wisconsin, was a visible writer with
type bars, a three bank keyboard and a double shift action.

Schiesari 1919-1919

This typewriter was a word writing machine, designed in
Turin, Italy. The Syllabic Typewriter Company in New York
was organized to manufacture this unusual typewriter, but
the product was never brought to market.

Secor 1911-1916

A visible printing point, single shift position and typo
bars wore features of this typewriter. It was a successor
to the Williams typewriter and manufactured in Derby,
Connecticut.

Sholes Visible 1909-1912

This typewriter was introduced by the C. Latham Sholes
Typewriter flanufacturinq Company of Milwaukee, Wisconsin.
It was a very slow visible writer and did not enjoy much
sales volume.

Stearn s 1908-1915

Hanufactured by the £. C. Stearns and Company in Syracuse,
the Stearns was a visible writer with a four bank, sinqle
shift keyboard.

Sterling 1911-1914

A small visible writer with a three bank, double shift
keyboard, the Sterlinq was manufactured in New York City.
It was also sold in Great Britain.

Sun 1885-1925

Banufactured by the Sun flanufacturinq Company, this
typewriter was first sold as a stylus operated machine. In
1901, a front strike, visible model was introduced. The
typewriter enjoyed considerable popularity and a number of
different models were introduced.

Tavlor 1910-1910

This was an electric typewriter desiqncd by Joseph Tavlor
of Rochester, Now York. Ho means for marketinq the machine
was developed and it went off the market in the same year.

Triw ph 1907-1907

This machine was first introduced in 1907 in
City. The factory was in Kenosha, Wisconsin. Tha
was a visible writer with a lour bank keyboard
bars. It went into receivership the same year
introduced.

•Jew York
Triumph
and type
it was

212

Victor 1907-1923

The Victor Typewriter Company was organized in 1907, a
successor to the Franklin. It was sold in both the United
States and Europe until 1919. After that date, it was sold
exclusively in Europe.

Iisi3cai>h 1910-19 19

This machine was manufactured in Sew York City. Durinq
the nine years that it was sold, it attained respectable
volume as a visible typewriter. In 1919 manufacturinq
riqhts wer sold to the Federal Adding Machine Company and
renamed the Federal.

Walker 1910-1912

This was a noiseless typewriter introduced by C.
Willington Walker of Stamford. It featured a motionless
carriage. The Walker went off the market in 1912.

1887-1909

Invented by John Hewton Williams and manufactured in
Derby, Conn., the Williams featured type bars mounted half
in front and half behind the cylinder and a partially
visible printing point. It went into receivership in 1909
and was purchased by the Secor Typewriter Company.

Woodstock 191A-1935

This typewriter was successor to the old Roebuck and was
Manufactured in Woodstock Illinois. It attained
considerable popularity, and during the middle thirties,
was purchased by the R. C. Allen Adding Machine Company.
It. C. Allen dealers still aanufacture and sell this
typewriter.

KSElil 1886-1900

2X3

This toy typewriter, manufactured in 1886 in Boston, was an
indicator-type machine with type arranged in alphabetical
order on a revolving disc.

Yu Ess I 9 I 8 -I 920

Introduced in America in April 1918, by the manufacturers
Of the Mignon typewriter of Germany. It was a very slow
one-hand operated typewriter and never enjoyed much volume.

Source : The data for this Appendix was supplied by Mr. Wayne
K. Boulton, Product Analyst for Royal Typewriter Company in
Hartford, Connecticut. He obtained the data from the
International Office Equipment llagaxine, Vol. 55 , (New Yorlc:
Business Equipment Publishing Company, October 1923). This
represents one of the most complete historical records of
the early typewriter business in tho United States and is
a prime reference source for Royal.

CHAPTER VIII

THE EDUCATIONAL EARKET FOR TIPEVRITERS

For several years electric typewriters have dominated
the large and small office market. Great efforts have also
been made in the sale of electric typewriters for home use.
As reported in 1967, less than 30 percent of the homes in
the O.S. have portable typewriters.* This means that a
great opportunity exists for the sale of electric
typewriters in this area. However, both these areas are
dominated by two firms — IBH in the office electric market
and SCR in the electric portable market for the hone.

Bith the market for electric typewriters in the
educational field the situation is quite different. With
no one firm dominating the sale of electric typewriters in
this area one could classify it as an "open field". With
the large demand for electric typewriters in the office and
now in the home, the educational field will rapidly be
shifting from manuals to electrics in the typing classroom.

These facts would certainly lead the major typewriter
firms to make large sales efforts in this area. To become
more familar with this new market, it might be advisable to
first examine the national scope of this market.

A. pimen sjon s oj[ the Educational Rajkot

*15

The dimension of the educational market for
typewriters is quite large — both in terns of the number
of school systems and the enrollment of students within
each system. Table VIII-1 presents data on the number of
school districts by geographical area in the U.S. These
data show that there are over 25,000 school districts in
the U.S., with the qreatest number occurring in the Great
lakes and Plains states and the West and Southwest states.
Table VIII-2 presents data on the number of schools —
private and public — by grade. One observes that there
are a larqe number of schools in the secondary system where
the typewriter firms could make substantial inroads.

Another area to examine is that of the total
enrollment fiqures across the nation. Table VIII-3
presents a breakdown of the enrollment and system fiqures
by size of enrollment. Over 12 million students are
enrolled in 170 school systens that have 25,000 students or
■ore. This would indicate a key area where typewriter
■anufacturers could concentrated in the sale of their
electric typewriters. The majority of these systems would
be in the metropolitan areas. Table VIII-4 further breaks
the enrollments fiqures down by grade cataqory.Over 13
■illion students are in grades 9-12 where a qreat deal of
typewriter education is done.

21$

TABLE VIII-1

HUffiER OF SCHOOL DISTRICTS AND AVERAGE
EKROLLMEOT PER DISTRICT I965-I966

Humber

Percent

Average Enrollment
Per District

Halted States

25,933

100.0

1,562

Borth Atlantic

4 , 00 6

14.8

2,463

Great lakes and
Plains

14,744

54.6

804

Southeast

1,821

6.8

5,336

West and Southwest

6,412

23.8

1,669

Source: Standard Education Almanac (Los Angeles: Academic Madia, Inc.,

1^68) pTiBj.

217

TABLE VHI-2

PUBLIC ABD PRIVATE SCHOOLS HUMBER
EC I2VEL 19301966

Type of School 1366 :

KLenentary (Excludes Kindergarten) 88,162

Public 73#4oo

One Teacher 6,700

Non Public « 14,762

Secondary (includes Junior High) 31#144

Public 26,700

Hon Public 4,444

Institutions of Higher Education 2,230

Public 821

Private 1,409

Source: U.S. Departaent of Cocscerce, Bureau of the Census, Statis¬
tical Abstract of the U.S., 89 th Edition, 1963# p. 105.

218

TABLE VHI-3

DXSTRXBOTIO'l OF LOCAL SCHOOL SYSTEMS AND
ENROLLMENTS, BY ENROLLMENT SIZE OF SYSTEM

FOR THE U.S., FALL I 967

Enrollment Size

Hiraber
of systems

Enrollment

Total Operating System

20,255

100.0

43,626,654

100.0

Operating System 300 or
more students

11,862

58.6

42,891,932

98.3

25*000 or more

170

12,539,348

28.7

10,000-24,999

529

2.6

7,744,636

17.7

5,000-9,999

1,083

5.3

7,^50,234

17.1

2,500-4,999

1,941

9.6

6,752,568

15.5

1,000-2,499

3,500

17.3

5,677,585

13.0

600-999

2,058

10.2

1 , 605,072

3.7

300-499

2,581

12.8

1,122,489

2.6

Operating Systems less
than 300 students

8,393

41.4

734,662

1.7

Source: U.S. Department of Health, Education & Welfare, Office
of Education, Ed ucation Directory 1967 - 6 B, Fort 2, Public
School Systems (Wusnincton, D.C.: Coverrment Publications,
1968 ) p. 6.

219

TABLE VIII-4

SCHOOL E?ffiOLLKSNT AND EXPENDITURE
B3f TIES OF SCHOOL 1930-1960
(enrollment In 1,000)

Total

54,500

Grades 1-8

36,000

Private

5,000

Public

31,000

Grades 9-12

13,000

Public

11,700

Private

1,300

Higher Education

5,526

Public

3,624

Private

1,902

Source: U.S. Departcent of Ctt nerce, Bureau of the Census. Statis¬
tical Abstract of the U.S. 1968 , 69 th Edition (Washington, D.C.
U.S. Government Printing Office, 1969 ) p. 105.

220

What is important to note is that the number of
school aqe children is increasing rapidly. This is
indicated by Table VIII-5 which projects enrollment in the
first twelve grades to 53.6 Billion by 1975. With more and
■ore of the students taking typing classes this leans that
not only is the current market for typewriters large in
this area but that it is qoing to increase in the
forthcosinq years. Recoqnizinq this one can examine the
efforts typewriter manufacturers are making in the
educational market.

B. Harketing Effor ts of the Fou r Kajor Typewriter
Compan ies

Since the early 1960‘s the major typewriter
■anufacturers have been making a concentated sales effort
in the educational market. In the present school typinq
classrooms one-half of the typewriters carry the Royal
name. 2 However the vast majority of these are manuals and
as the "electric fever" takes a tiqhter hold most of the
■anuals will be replaced. The manufacturers who start
early in this transition may get a definite head start in
terms of future sales.

Data on the typewriter manufacturer's effort in this
area are scarce. Two firms that have published information
in this area are Underwood and Royal.

221

TABLE VHI-5

FALL ENROLLMENT, BY ORGANIZATION LEVEL
OF SCHOOL AND CONTROL, U.S. 1955-1975
(data In 1,000)

Tear

K - 12

Elementary

Secondary

1965

**3,774

31,716

17,028

1966

49,770

32,200

17,500

1970

52,300

32,200

20,110

1975

53,600

31,400

22,200

Source: Standard Education Almnac (Los Angeles: Academic Media,

me., 1966 ) p. 152 .

222

Xn 1960 Underwood established an Educational Division
for the "express purpose of guiding, coordinating and
proaotinq Onderwood's activities with the nations
schools". 3 The firm sent personal letters and direct mail
advertising to school officials and Underwood replied to
all requests for teaching aids. In addition the division
attended various key business education conventions
displaying and demonstrating their products. While this
was qoinq on the educational section developed training
innovations to help instructors and students. School
awards and certificates for outstanding achievement by
students were distributed. Lectures and demonstrations
were qiven in schools across the nation.

The net effect from this vast marketing effort was
that there was a substantial increase in the sale of
standard manual and electric typewriters for educational
purposes. This effort has also led to successful sellinq
of related products such as addinq and calculating machines
for educational purposes.

Since the early 1960’s Royal has been conducting
several research studies on the use of typewriers in the
education field. One area of emphasis has been the use of
the portable typewriter as a learning tool at the
elementary and junior high level. In 1960 a one year study
was concluded by three major universities under qrants from
Royal. Their reports indicated:

223

... that the typewriter had educational
value in improvinq work habits, developinq skills
in Enqlish qtammer, improvinq composition skills,
inprovinq the speed and quality of handwritinq,
decreasinq the time needed for written reports,
and increasinq the quality of written work
produced in various sub-ject areas. Growinq
interest has been evidenced by elementary school
administrations in the potential of the portable
for classroom use and the company has initiated a
sales proqram to make portable typewriters and
specific teachinq aids available for -elementary
classroon use. *

Another study was concluded at the Middletown Ohio
City School District in 1964. This study utilized portable
typewriters and seventh qrade students. The results aqain
shoved that portable typewriters helped students in their
studies.*

The effort that Royal has made in the educational
narket can be exemplified by a 1963 survey reported in
Royal's 1964 Annual Report:

This survey conducted by independent
researchers, covered biqh schools with
enrollments of over 2,100 in the state of
Indiana. The findinqs showed that the schools
preferred Royal manual and electric typewriters
for their classrooms by almost 4-1 over any other
make. Royal also was named by 3 to 1 over the
nearest rival as the typewriter which was the
■ost trouble free repair wise. *

Hhether typewriter manufacturers conduct research
studies in various school systems or whether larqa

224

aark“tinq efforts are made in the educational aarkets the
results are the sate. Typewriter aanufacturers that Bake
stronq sales and aarketinq efforts in this area will
undoubtedly be aakinq stronq inroads into the future
aarket. When .the field starts switching to electric
typewriters it Bay well be that these firas will be in the
front runninq.

To qet a clear picture of what is actually happeninq
in the current aarket for electric typewriters one can
exaaine the experience of the Los Angeles School Systea
with electrics.

C. Hark et Characteri s tic s of the L.A. Sch ool System -

The Los Angeles City School Systea is the second
larqest in the nation with 620,300 students compared to New
lork with 1,074,000 students and Chicago with 548,000
students. Table YIII-6 qives the enrollaent figures for
those students taking typing classes in junior and senior
hiqh in the L.A. systea durinq the Spring of 1968. Of the
620,300 students enrolled in the L.A. system roughly 46,000
take typinq classes each semester or nearly 96,000
annually. This does not consider the enrollaent in summer
sessions since the data was not available.

Another important aspect of this analysis is the
nuaber of aachines it takes to supply the students. This

225

SABLE VHI-6

EKBOUU5E3T IS LOS ANGELES SCHOOL

SYSTEM, SHUUG 1968

Humber of Students

Jtacior Hi(^i School

Personal Typing I

2 d, 308

Special Schools

346

Personal Typing n

A, 881

Special Schools

Typing Service (Office Help)

351

TOTAL

23,979

Senior Eifdi School

Personal Typing I

9,500

Personal Typing II

6,195

Personal Typing III

2,878

Personal Typing IV

867

Office Procedures I

1,632

Office Procedures II

2,014

TOTAL 23,083

Source: Reports of Subjects end Enrollments- junior end Senior
Hlffr ScBooX—for Lprlr..-; Semester lyoci (Los Angeles: Division of
Secondary Education and Keusuresent and Evaluation Section, i960).

226

data is shown in Table VIII-7. Bithin the 120 schools in
the L.A. systen thece are lb,728 machines that are used in
the classroom. The use of these machines is quite
extensive. These typewriters are used 6 periods a day 5
days a week and b niqhts a week with the adult classes.
There is an extensive niqht program for adults in the L.A.
systen.

One of the aost inportant features in buying
typewriters for the city systen is the price. All buyinq
of typewriters is by "low-bid". This neans that price
* competition plays a dominant role in this situation. The
city school system does all of its own naintenance of
typewriters with few exceptions. And the L.A. school
systen never buys used typewriters.

With such a larqe number of typewriters — mostly
aanuals — in the school system, it would seem that a great
opportunity exists for typewriter firms — selling

electrics -- to make larqe inroads into this narket when

the real shift to electrics start. One of the more

inportant factors to remember in any sale of electric

typewriters to the L.A. school systen are the special
requirenents and characteristics of that market.

D. Extent of EJgstrif ica tion irj the L.A. School Sy ste m

Of the 120 junior and senior high schools in the

227

TABLE VHI-7

HUGER OF TYPEWRITERS IN L.A.

CIEf SCHOOL SYSTEM

Humber of Typewriters

Jtmlor High School

72 schools — average 2 classrooms
with 50 machines each

7,200

Senior Hi^i School

48 schools — average 2 classrooms
with 50 machines each

4,800

Office Procedures 12th grade —

1,728

36 machines per school

Additional Classrooms (junior and Senior High)

One-third of the schools have an 2,000

additional classroom — 40 schools
with 50 machines each

TOTAL 14,728

Source: Data obtained in a telephone interview with Mr. Bart Wigge,
Head of the Business Education Department, Los Angeles City
School System on July 16, 196J.

228

systea there are only four senior high schools that have
electric typewriters. Each of the four high schools have
one classroon each that is electrified. Each classrooa has
50 aacbines which leans that out of 14,728 aachines used in
the classrooas only 200 or 1.36 percent are electric
typewriters.

These machines are basically - for experimental
purposes. One of the rooms is provided with fifty IBtl
electrics and another room with fifty Royal electrics. The
funds for these 100 aacbines were provided by the federal
governaent under the Vocation Education Act. The other two
classrooas contain 100 Olivetti-Underwood electric
typewriters.These typewriters were financed through
district funds. At one time the L.A. City School System
had a fifth classrooa equiped with fifty SCB 250 models.
However, these aachines didn't hold up so the system
disposed of them.

At present IBB sales are qeared to the selectric and
since used eguipaent is not accepted the IBB 500 electric
is not used in this school system. It is interesting to
note that of the electrics in the classroon
Olivetti-Onderwood has 50 percent of the aarket. The
dominant factor for Olivetti-Underwood's lead is that the
school systea buys froa the company that subaits the lowest
bid. Olivetti-Underwood has always been able to aeet this
requireaent and since their aachines aeet the school

229

specifications they usually get the bid. At first the
Olivetti-Onderwood Scripter was used, but now the systea
uses the Olivetti-Underwood 700 electric.

Since the school system has its own aaintenance
department no service contracts are needed. Of the four
different types of machines used most have not caused any
trouble. For awhile the school system repaired the IBtl
selectrics, but since they took so long to fix the systea
finally signed a maintenance contract with IBH. As was
stated before the SCH 250 didn’t hold up under constant
usage. As a conseguence the school system will not buy any
portable aachines or compact electrics. Nothing less than
a full standard office electric machine will be purchased
when the purchase of an electric typewriter is aade.

The reasons why a school system would want to buy
electrics is an important consideration. One of the major
reasons is the continued trend of electrics in the office
and in the hoae. It is sometimes felt that students
schould be instructed on machines similar to what they will
use later. Another consideration is that there is less
fatigue on an electric typewriter. However it is
interesting to note that after testing the electric verses
the annual there is no clear evidence that students laarn
to type any quicker on an electric as conpared to a manual
■achine. And that no one electric model stcod out to be
significantly better than any other typewriter. So it

230

would seew that the wain criteria for baying electrics are
price and durability.

As evidenced by the previous sections it would seen
apparent that the shift to electrics has not taken hold in
this school system. However it is certainly forth coainq.
There still are a lot of aanuals bought for the school
systew. In the past Olivetti-Undervood frequently got the
bid. But recently they have quite conpetinq in the aanual
market for it was not profitable. Host recently Olympia
qot a bid for the sale of aanuals to the L.A. school
* systea.»

One of the factors that is qoinq to slow down the
transition froa manual to electric typewriters in the L.A.
school systea is the current budget crisis. For this year
at least no aore electrics will be purchased. It will even
be difficult to replace aanuals. Originally the school
systea had a seven year replacement schedule. Recently
this was raised to ten years and now with even greater
budqet problems the replacement period will be longer.

Even with these iapediaents to a changeover,
eventually the switch will occur. When it does it will mean
a great aany orders and the firas that prove themselves
worthy in these trial periods will be the ones that qot the
future bids. Host recently in the L.A. school systea a bid
for 100 electrics aachines was distributed. It is still
too early to state which coapany got the bid, but this

231

could be the beqinninq of a trend

232

FOOTHO TES TO CHAPTER Till

1. Annual Report of Sperry Ran d Corporation. J967 , p.

22 .

2. Annual Report of Litton Industr ies . 1 965 , p. 11.

3. Annual Rep ort of Oliv e tti-Unde rwood. 1 962 .

4 . Annual Report of Royal-Mc Bee Corporation, 1960 , p. 8.

5. Ibid ., 1964, p. 4.

6. Ibid.

7. Huch of the information provided in this section was
obtained in a telephone interview with Mr. Bart Wigge, Head
of the Business Education Department, Los Anqeles City
School System on July 16,1969.

233

CHAPTER IX

PDTUHE TRENDS IN THE TIPEWBITER INDUSTRI

The typewriter industry has undergone some dramatic
chanqes over the past years. It is the purpose of this
chapter to exaaine these chanqes in light of their inpact
upon the current and future status of this industry.

A. Public Policy Guidelines as Rel ated to a Co hi pet it ive
* Atnospher e

Hecoqnizinq that the sales of nanuals as compared to
electrics are on the decline, the path of the typewriter
■anufacturcrs seems clear. Either they continue to lose
their aarket position to IBH or they lower the "competitive
barriers” in soae Banner and effectively coapete. The
fandanental question raised is, what would be ideal fron a
public standpoint if policy could influence the future
direction of the domestic typewriter industry in the U.S.?
Soae basic policy guidelines are suggested by Professor
Bain in bis analysis of the comparative influences of
seller concentration as coapared with barriers to entry as
influences on aarket performance, lie concludes as follows:

The aarket perforaance of the highly
concentrated industry may be much better froa a
social standpoint if it is not protected by very
high barriers to entry. In consequence, policies

234

designed to reduce excessive barriers to entry
■ay be considered as alternatives, as well as
supplements, to a policy designed to reduce
seller concentration. Hiqh concentration nay be
a relatively innocuous phenomenon if entry
barriers can be reduced to a moderate level. 1

Pour such barriers to entry were outlined in Chapter III.
They were economies of scale, absolute cost barriers,
product differentiation and capital requirements. The
policy implications of these barriers must be related to
the fundamental characteristics of this industry.

The Sperry Band Corporation appears to have achieved
* a Remington standard office electric typewriter technically
competitive with the IBM models. with only 2. 1 percent of
the office electric typewriter, and with only 1.1 percent
of the full-feature deluxe office typewriter market,
Beminqton faces the overwhelming marketing and service
organization strength of IBK.

Thus the capital requirement is one of the biq
barriers facinq Sperry Rand. To effectively increase its
■arket share Sperry Rand would have to follow the footsteps
of Olivetti in an outlay of $75 to $100 million to build a
competitive marketing and distribution system. The only
question is that, with such a large diversified
organization, is the outlay of these funds in a $600
■illion a year industry as effective as an equivalent
outlay in the computer industry which has a much higher
annual sales rate?

*35

The future consistency of the industry way be
considerably different as far as Sperry Band is concerned.
They way remain in the industry with the saae market share
or if their market share decreases substantially they way
pull out altogether deciding that the energy and money
expended in this industry could be utilized to a better
extent elsewhere.

After the severe adjustments following the acquistion
of Onderwood by Olivetti, Olivetti-Underwood appears to be
effectively utilizing the marketing and service
‘organization financed by Olivetti. Olivetti-Underwood
possesses good electric models and has 10.4 percent of the
office electric typewriter market, with 6.6 percent of the
full feature deluxe electric office typewriter market.

Olivetti-Underwood may be one firm that will make
inroads into the future market share of the industry. They
have already crossed the capital requirements barrier.
With Olivetti's ties abroad they can probably obtain some
advantages in terms of reduced production costs. However
the main problem facing Olivetti-Underwood is to regain the
lost confidence in their products. The firm has to the
inertia that IBfl has developed in product acceptance. They
have to demonstrate effectively that Olivetti-Underwood
products are as convenient to operate and have as high a
quality as the products of IBM. With product acceptance,
price cospetition can go a long way in helping re-establish

23 6

Olivetti-Onderwood in this market.

As yet SCtl has not wholly solved its typewriter
aarket problem. A broad diversification and acquisition
proqraa has provided the company with a growth momentum
which will brinq total coapany sales to over $1 billion in
a few years. This has lessened their dependence upon
typewriter sales. But SCH appears to have given up its
aspirations of competing with IBH in the office electric
typewriter aarket with the dismantling of its direct sales
organization, a prerequisite to supporting an effort in the
‘office electric typewriter field, sen's position reoains
stronq and growing in the portable typewriter field, where
it does not face the competition of IBH and for which a
specialized dealer channel of distribution is effective.

As the demand for typewriters in the home
especially the demand for electric portables — increases
along with the increased prosperity of the country, SCH can
look forward to increased sales and an increasing market
share in the portable and electric field. SCH has already
successfully differentiated its product by beinq the sole
successful seller of portable electric typewriters. Bith
such a dominant position in this area it certainly has
economies of scale and undoubtedly is developing key cost
advantages. The capital requirement barrier is not
significant since a direct sales network is not needed.
However if SCH re-enters the full feature office electric

237

field, it will have to spend a qreat deal of money due to
the requirements of such a aote. However for the immediate
future it appears that this is not the plan of SCH.

Boyal has 11i2 percent of the office electric market
and 7.3 percent of the full feature deluxe office electric
aarket. However, increasing problems of aaintaining that
share of the aarket confront Boyal. ” In office electric
typewriter fully competitive with the IBB models has not
been achieved by Boyal. It continues to be plaqued with a
hiqh level of aaintinance costs and associated service
calls necessitated by maintenance and repair problems.
This problem combined with the declining share of aanual
sales have helped reduced the overall market share of
Boyal.

The course of action that should be proposed for
Boyal would be one that would seek to stea the continued
erosion of the firm's market share in the standard office
electric typewriter market. Its position has already
declined with unfavorable impact on its direct sales and
service organization. The main pressure, therefore, is to
stem further erosion. If Royal loses a significant share
of the office electric market along with a loss in the
aanual market — which is decreasing for everyone — the
coapany would literally be out of the industry. The
industry would then be further concentrated and the
doainance of IBB increased.

238

To atteapt at this stage to develop an office
electric typewriter technically competitive with IDS would
pash Royal still farther behind in the business competitive
race — a setback which could iapair the competitive
capabilities in the future. A tine lag of several years
would be required to develop a technically efficient
electric typewriter product. An additional tine lag of a
aoaber of years would be required to regain narket

acceptance lost due to the difficulties of the present
electric typewriter manufactured and sold by Royal. In
’ addition, the outlays would be substantial with the payback
extended over such a lonq number of years as to represent a
highly uncertain and unattractive return on the investment
cowwitted.

The solution that would, at least for the present,
hold Royal's narket share and in the near future help
increase it — thus helpinq the competitive atmosphere of
the industry — would be a merqer with some company that
has a technically competent office electric typewriter.
Since antitrust emphasis seems directed against seller
concentration, it seems unlikely that a merqer with a
domestic producer would be feasible. This leaves the field
open to a foreiqn manufacturer which by definition is
limited to its maximum market share of 2.5 percent due to
the marketing and distribution prohleas discussed earlier.

By joining Royal with a foreign company which

239

manufacturers an office electric typewriter technically
coapetitive with IBS, another entry into the typewriter
industry with prospects of effectively competing with IBS
would be achieved. The aarkatinq organization of Boyal,
while still Maintaining some effectiveness, could be
utilized by the foreiqn manufacturer.

It should be re-emphasized that this does not
represent an automatic addinq of market shares. There is a
tiae lag involved before the proqraa would really get under
way. First, tiae would be required for restyling and
’ redesigning as the Royal typewriter. Sales and service
staff would have to be augmented and trained to handle the
new product. In addition, tiae would be required to
achieve a sales momentum. Thus, sonethinq on the order of
three years would be required to have a competitive product
in a business sense ready, hopefully to nake sone aarket
iapact.

& second advantage to this course of action would be
the possibility of Royal's entry into the Western European
aarket with its nanual typewriter line. Royal possesses no
effective narketinq organization for its annual typewriters
in Western Europe. The inroads of the electric on the
annual typewriter have not proceeded to the same degree in
Western Europe as they have in the U.S. Thus, the aarket
potential remaining for manual typewriters in Western
Europe provides an attractive aarket for an effective entry

by Boyal and therefore lore complete utilization of its
O.S. nanufacturinq plants for the production of nanual
typewriters. This would also be another positive step in
helpinq the balance of payments which has been partially
impaired by the tremendous inroads Bade by foreiqn
■anufacturers of typewriters since 1957.

Another distinct advantaqe of a successful product
■erqer would be the assistance in a reduction of IBM's
predominance in the office electric typewriter market, or
the avoidance of further increase in IBM's dominant
position. In some cases where a merqer enables a new fira
to challenge the larqest firms more effectively, there may
be competitive in-jury to the smaller firm. However, there
are only four other firms manufacturing typewriters in the
U.S. If IBM's dominant position can be reduced or if its
increasing dominance can be retarded by reducinq the speed
of the erosion of the aarket position of one of the other
four firns, the relative d isa d vant age of the other three
firas in relation to IBM is reduced. A reduction in the
relative advantaqe of a firm which possesses approximately
80 percent of the deluxe electric typewriter aarket, offers
a substantial potential for a revitalization of entry in
terns of the ability to compete effectively with IBM.

Another aspect of the problems at Boyal is in terns
of product differentiation. Professor Bain, in his study
of the typewriter industry as of the late 19U0's and early

1S50*s, saw product differentiation as an important entry
barrier. He observed:

The primary basis of differentiation seems
to lie in product reputations and particularly in
customer service (involving repair, aaintenance,
inspection, etc.) built around established chains
of dealers. *

Hhat was true at the tine of this earlier study of
the typewriter industry has becoae of increasing importance
in connection with IBM's position in the market today. In
the areas of technical product performance, relatively low
Maintenance costs, low service costs, outstanding
reputation of product, strength of marketing organization,
strength of service organization, strength of related
product lines with which the typewriter lines are sold, the
position of IBM is clearly dominant.

The proposed course of action would provide Hoyal and
Litton with the possibliity of maintaining its market share
against further inroads from IBM. In addition, it would
increase the possibility of -Justifying further investment
outlays in efforts to confront the overwhelming market
position of IBM and to make investments seeking to develop
a marketing and service organization supported by
technically competitive products .

The present dominant position of IBM represents a set
of business and economic characteristics constituting a

2b 2

virtual barrier to the entry of any new fira. The
strenqtheninq of any one fira thereby reducinq the trend of
increasinq doainar.ee of IBS, would mitiqate to some degree
the foraidable existinq entry barriers. Any hope for
achievinq an effective new entrant at the present and
increasinq the possibility of effective new entrants in the
future aust lie in the near-tern achievements by the four
typewriter manufacturers in first developinq an office
electric typewriter technically competitive with IBS and
then utilizing their remaininq strenqth in their marketing
orqanization before deterioration proceeds further.

B. tong Tera Pr ospec ts for the Typewriter Industry

The typewriter industry is one that is rapidly
chanqinq today and will incure even more dramatic chanqes
in the distant future. Technoloqical chanqes are such that
within 10 to 15 years the typewriter industry as is known
today aay no lonqer exist. The structure of the industry
aay or aay not be similar dependinq upon whether existinq
firas and potential entrants can progress as rapidly as the
industry leaders.

Already what was once thouqht to be an indispensable
part of the typewriter's function is rapidly disappearing.
An inportant aspect of the typewriter is the ability to

2*3

produce clear carbon copies. A qre.t deal of time, effort
and noney is expended in performing this task, Mistakes
are difficult to correct and the carbon copies are messy to
handle. How the ability to reproduce oriqinal copy through
a photo process — at reasonable cost — has helped to
eliminate this task. Besides the electronic data
processing field, the copying/duplicating area is one of
the larqest growing.

Firms such as Xerox, 3n, Royal and SCH have entered
the photocopy industry. Only two of the traditional
typewriter manufacturers have entered this field — Royal
with its Royfax and Yivicopy lines and SCH with its single
stage dry process machines, the Coronastat 33, 44, 66 and
88.* But note that two other firms not previously mentioned
are active in an area that substitutes for one of the
functions of the typewriter.

1BR has gone a step further with the' IBB flT/ST. This
machine has one unit consisting of a typewriter and another
consisting of a disk tape. Typed material is automatically
recorded. Errors are easily corrected with no erasing and
as many oriqinal copies as desired are momentarily
available. This machine has one advantage over the
photo-copying machines and that is that it can reproduce
many copies which are as good as the original whereas the
photo-copyinq machines reporduce copies of a somewhat
poorer quality.

What is important to note with respect to this area
is that presently there is not one larqe office, or school,
or library that doesn't have several photo-copyinq machines
and or an IBH HT/ST.

Eventually however, the typewriter as it is now known
will no lonqer exist, when the electronic era is reached
soae other device will be substituted to- carry out the
duties previously performed by the typewriter. What device
will be used is unknown today, but this new era may not be
far off.Already numerous corporate research departments are
experimentinq with different devices. In 1961, it was
reported that RCA had developed a device that would receive
direct dictation and produce printed copies.*

As with the electric era, a qreat deal of expense and
time will be expended in developinq and aarketinq such a
product. It is important to emphasize that the firms that
will have siqnificant market shares in this era will be
those that (1) develop the needed technoloqies soon enouqh
and (2) develop a stronq earketinq and distribution system.

Whether the industry composition will reirain as it is
known today with Reninqton, Royal, Underwood, SCfl and IBH
is quite debatable. With such a larqe expenditure required
in terns of technoloqical development and in terms of a
marketinq and distribution system, it is possible that IBH
nay be 100 percent of this new industry if the traditional
typewriter companies do not proqress in this area soon. Or

perhaps qiants such as IBB, Xerox and HCA will dominate the
industry.

It is eainently apparent that the typewriter industry
is proqressinq throuqh three distinct staqes. The
pre-electric era is truly of the past. The electric era is
upon us and will be prominent for the next several years.
And then the electronic era will emerge openinq new vistas.
Hhat lies ahead is truly open to present day nan's
iuaqination and tonorrow's nan's ingenuity.

2 k6

FOOTNOTES TO CHAPTER II

1. Joe S. Bain, Barriers to New Co mpetition (Caabridqe
Hass.: Harvard University Press, 1956) p. 218.

2. _Ibid., p. 285.

3. "Shifts Hay Inprove Typewriter Results", Financial
World. (January 11, 1961) p. 13 and SCfl, Annual Report,

19667 1958.

4. John Sine, "Typewriters", Adm ini strative Hanaaenent,
(Hay 1961) p. 73.

2k?

chapter x

SUBHART AND CONCLUSIONS

Nearly 100 years have transpired since the invention

of the first practical typing machine in 1873. Curinq that

time span one may observe that three distinct tine patterns

have occurred or are in the process of occurrinq. The

three periods are the pre-electric era, the electric era,

and the electronic era.

The pre-electric era saw the development of the
■anual typewriter which resulted in four firms beinq the
dcfinant producers. Curinq the early 19CC's cne could buy
from rouqhly 150 different manufacturers.From an industry
of over 100 firms, there euerqed feur dominant
Manufacturers — Beminqton, l.C. Smith, Royal and
Onderwccd. They accounted for 80 percent of the market
share durinq the 1930's. The shift in popularity from one
manufacturer to another was dependent upon new styles or
new improvements in the machine. Up to and includinq the
1920's, Underwood was a favorite. However, due to
Underwood's technical stagnation Royal became more popular,
and by 1938, Royal had fully established itself as a
selling favorite.

The consolidation in the typewriter industry was
composed of two parts. Hany of the typewriter firms that

bad been formed during the 19CO-1910 period had disappeared
by the end of Horld Bar I. Then in the 1920's a Berger
movement occurred which helped round out the product line
of certain firms. L.C. Snitb and Corona Typewriter
Coapanies merged, Remington Typewriter Company and Rand
merged, as did Underwood and Ellict-Fisher.

Chapter III attempted to analyze the market structure

of the typewriter industry and to relate this structure to

possible forms of market performance. Two hypothesizes

were therein developed and tested. The first was the
»

hypothesis that the typewriter industry conformed to the
definitions of oligopoly set forth by economic theory, that
it was a highly concentrated industry and that this would
lead to express or tacit collusion resulting in excess
profits. Two tests were used to determine the degree of
seller concentration within the industry. The first
measured the amount of total market value accounted for by
the tOF four and tcp eight firms. It was found that from
1935 to the present the top eight firms accounted for over
90 percent of the market value and the top fcur over 70
percent. Bith a concentrated industry being defined as one
with 70 percent or more of the industry cutput being
accounted for by the top four firms, the typewriter
industry definitely fits the classification of a
concentrated industry, when examining the market shares of
individual companies over time it was found that four firms

each accounted for 20 percent of the market up to the early
1950*s, at which time IE3 and the electric typewriter
becaae prominent. it the present time the industry has
shifted from an oliqopoly to one of partial EcnoFoly with
IBB as the doainant firm.

Shen the hypothesis of seller ccncentration was

related to excess profits it was not substantiated. The

industry is hiqhly concentrated but the industry itself has

net experienced larqe profits. Some cf the firms have had

substantial losses throuqhout the years. Only durinq the
«

tine periods of 1936-1940 and 1947-1951 did the averaqe
Frcfit rate on equity exceed 15 percent. From 1952 on, the
rate of return on equity never exceeded 8.2 percent.

Economic theory suqqests that if seller ccncentration
exists within an industry, barriers to entry may also
exist.- Thus, a second hypothesis was developed to test the
relaticnship between seller concentration and barriers to
entry in the typewriter industry. Four barriers were
considered — economies of scale, absolute ccst barriers,
Frcduct differentiation and capital requirements. It was
found that economies of scale existed in the pre-electric
era and in the electric era. Absolute cost advantaqes were
net siqnificant in the pre-electric era but with the
development of the electric typewriter they have become
quite important. Froduct differentiation has teen a stronq
barrier to entry in both time periods. Up tc 1960 thero

250

was no available information on the capital requirements
barrier. However, usinq Olivetti's purchase of Underwood
as a possible aodel of capital requirements it has been
estiaated that to enter this industry with a stronq
aarketinq and distribution system an investment of $50 to
$1C0 aillion is required.

Thus, one can conclude that: (1) the typewriter
industry has teen transformed from a structure of oliqopoly
to a structure of partial monopoly with IBH as the dominant
fire, and (2) the industry is hiqbly concentrated, with a
hiqh deqree of barriers to entry, but with no apparent
persistence of hiqh profits, except possibly for IEK in the
post-war period.

The product and distribution patterns in the
typewriter industry have been exaained in Chapter IV. The
industry can be divided into two major seqments -- portable
and office typewriters. Each of these can be further
divided into the aanual and electric markets. The portable
typewriter requires an emphasis on low cost production for
distribution throuqh aass retailinq organizations such as
discount stores, sail-order houses, department stores, and
specialty appliance and jewelry shops.

The aanual office typewriter represents a declininq
seqaent of the total office typewriter market. A
considerable deqree of pressure has been placed upon the
pricinq scheme of the office aanual typewriter by the

251

competition cf the full office electric typewriter and the
compact electric typewriter. With the observed sequent of
the total manual market declining as it is, one single
manufacturer of office manual typewriters would no longer
fce able to support a direct sales organization.

Experience demonstrates that effective marketing and
servicing of the office electric typewriter requires a
direct sales and service organization. To support such an
organization requires a hiqh density of volume on a
national basis aided by closely related product lines in
order to reduce the per unit marketing and service costs.

Upon examination of the narketinq and distribution
systen of the industry, IEH's head start during World War
II has provided IBS with a position that is stronq and is
qrowinq. Primarily IBH has an excellent machine and
retains the only firm which has an effective operating
selectric-type office electric. The naintenance expenses
and required naintenance calls on the IBM office electric
typewriters are low. IBB has developed a narketinq and
service orqanizaticn for its typewriter product line which
is larqer than the marketing and service organizations of
all of the other typewriter firms, both domestic and
forciqn, combined. Today the marketing and service
organization, along with product acceptance, is a fora of
product differentiation which represents a critical source
of market power that a typewriter firm may possess.

252

Ihe advantages of a strong product, low maintenance
costs, and extensive and effective marketing and service
organization enable IBM to assign small areas to individual
salesmen and servicemen so that intensive market coverage
is achieved. & related advantage is that the density
factor for IEH's aarketing and service costs results in a
very low ratio of aarketing and service expenses to
revenues. This provides IBM with another cost advantage
which adds to the over-all entry barriers discussed in
Chapter III.

Bith high density IEM can easily reach all types of
firns, both large and small alike. And with a related
product line in the typewriter field, IBM salesmen can sell
a family of products, thereby reducing marketing costs as a
percentage of sales. In addition IEM can make high level
contracts through its electronic data processing salesmen,
which contributes to marketing acceptance of its products
in a given organization. Thus, these related advantages of
IBM represent formidable entry barriers to new competition
in the electric typewriter field.

For the foreign typewriter manufacturers, there are a
number of elements to consider in any attempt to achieve a
ma-Jcr penetration into the U.S. typewriter market. If the
foreign manufacturer seeks to effectively penetrate the
office typewriter field, it must have an electric office
typewriter technically competitive with IBM. Possession of

253

a canual standard office typewriter will not achieve major
penetration because of stronq competition with the four
aajor O.S. typewriter manufacturers, plus the fact that the
■anual seqment of the office typewriter field is a
dwindlinq cne anyway (estimated to be 10 percent or less
within a few years).

To Basket the office electric typewriter, the most

effective form of orqanizaticn for any larqe penetration is

a direct sales force. Eut to achieve this requires

national coveraqe. This is because the larqe purchasers,
«

the "national accounts," represent approximately one-half
of the total office market. To provide the necessary
marketinq and service support to obtain the profitable
national accounts requires a national orqanization. But to
establish a national orqanization necessitates substantial
outlays of money. Bore importantly, until a hiqh volume of
sales is achieved in each of the reqicns, the burden of a
hiqh percentaqe of marketinq and service costs to sales
price makes profitability itpossible.

It is only in the low-price line seqment of the
■anual portable typewriter field that foreiqn firms can
penetrate. This cateqory of typewriters can be sold
thcouqh the mass retail orqanizations of discount houses,
■ail-order houses, department stores, and specialty stores
to achieve a relatively hiqh volume. The requirement of a
stronq service tack-up is not as qreat since it can be

254

provided by the specialty typevriter stores.

These generalizations on the potentials of the

foreiqn typevriter companies in the O.S. can be supported

in a number of ways. The most direct evidence is found in

the existinq lov market shares of foreiqn typevriter

cccpanies in the office electric typevriter field. In

addition, the inportance of the requirements of a larqe

national direct sales organization is indicated by

Olivetti's villinqness to make a larqe investment in

Ondervood to obtain its U.S. sales organization. Further
%

evidence is provided by the larqe additional sums — over
$100 million — that Olivetti vas required to invest in the
effort to achieve an effective national, direct sales
organization upon the base obtained frcz the Undervood

acquisition.

In addition to analyzinq the dominance of IBM in the
domestic market one can also analyze the domestic market's
declining sales trend abroad. Thus, Chapter V analyzed the
impact of foreiqn competition — both its impact inside the
O.S. and its impact on U.S. firms competitinq abroad.

In terns of the O.S. domestic firms contribution to
vorld trade, it is clearly evident that it has been
substantially reduced. Prior to Vorld War II, U.S. firms
accounted for 6S percent of the international narket, but
in the last decade this has been reduced to 10 percent.

In addition to the decrease in vorld trade in

255

typewriters, a larqe percentage of the O.S. firas hare

■owed various production facilities overseas. A nuaoer of

factors played an iaportant role in this decision. One was

the iopact of foreiqn coapetition upon U.S. firas in the

inexpensive portable field. The low production costs

abroad provided consideratle hurdles for O.S. firas which

resulted in a nuaber of then transferring production

facilities overseas. Another factor was the rise in

reqicnal econoaic trading blocks. To locate within these

qrcuFS and avoid tariffs and other trade regulations would
«

be advantageous to these firas.

It has already been established that fcreiqn firas
cannot coapete effectively in the U.S. in the office
electric typewriter field unless they spend larqe suas of
aoney for national distribution and service organization.
However, it is quite clear that the foreiqn ccrpetiticn is
stronq enouqn to substantially reduce O.S. sales of
typewriters abroad and to wake significant penetration of
the O.S. portable typewriter aarket — both in terns of
quantity of cachines sold and the quality of aachines
produced.

Following this analysis of foreiqn coapetition the
study turned its attention to the developaent of the
electric typewriter by inn, and the advantages that the
electric has over the Manual.

In 1933, IBH entered the typewriter industry by

25*

acquiring a firm called Electronatic Typewriters, Inc.

Prior to World War II, the impact of the electric

typewriter was not great.However, dorinq the war the

picture was radically chanqed. Virtually all of the

traditional typewriter coapanies were required by

qovernaent order to suspend the manufacture of typewriters

and turn their facilities to the production of war

aaterials. IEfl, on the other hand, was successful in

sellinq the concept that one IBK electric substituted for

two nanual typewriters, thus saving both aaterials and

labor.

Thus, World War II provided IBM with an opportunity
to achieve product acceptance and a significant head start
in perfecting the electric typewriter. Electric
typewriters now account for 76 percent of the office
typewriter market. A trend analysis indicates that this
share of the electric typewriters will rise to 90 percent
or aore of the office typewriter market during the next
decade.

With the increased volume of paperwork and the
increased cost of office help durinq the early 1950's, the
demand in the business world was for machines that
increased productivity and reduced costs. The electric
typewriter filled the need. With uniferm print, more
uniform carbon copies, less fatique to the operator, and
new features only available on an electric, the electric

257

typewriter went a long way in increasing office
productivity and reducinq office costs.

•The typewriter industry has had a lcnq history of
merqer and consolidation activity. In its infancy the
industry was comprised of 86 firms. At the turn of the
century there was a merqer of several companies into the
Onicn Typewriter Ccapany. This was basically a coabination
of a promoter, a stronq sales qroup and a stronq
■anufacturinq qroup. Hany of the merqers at this tiae were
for the purpose of obtaining market control, but unlike the
■erqers that created International Harvester or American
Can or U.S. Steel — where a partial monopoly was
eventually turned into an oligopoly — it can be seen that
this merqer of typewriter companies attempted to enable a
qrcup of firms to compete effectively aqainst other stronq
organizations. However, discontent within the qroup
quickly dissolved the organization.

Eurinq the 1900-1910 period there were many entries
into the industry since technology had net leveled eff as
yet. Of the 86 firms producinq typewriters, 70 disappeared
ty bankruptcy, either directly or after merqinq with other
firms that in turn went into bankruptcy. Sixteen firms had
some form of merqer activity at this time. Ten of those
firms merged with existinq firms, and today only five of
the oriqinal 86 remain. The merqinq activity of these
firms was no .guarantee of either continued market

258

effectiveness or even survival. Hor did the Bergers
undertaken durinq this tine period result in narket
control.

The qenezal merger movement of the 1920's essentially
rounded out product and distribution lines. In part, the
typewriter industry conformed to this pattern. The merger
of L.C. Smith with Corona in 1926 was for the purpose of
roundinq out the product line -- L.C. Smith with its
standard typewriter and Corona with its portable. In 1924
Beminqtcn purchased Noiseless for the purpose of roundinq
out the product line. This was similar in nature to the
Smith-Corona merqer. Then in 1927, Remington Typewriter
Ccvpany merged with Rand to round out the distribution
lines and perhaps qain some manufacturing economics with a
full line of office equipment. The year 1927 also saw the
■erqer of two firms heavily oriented in typewriter
production — Underwood and Elliot-Fisher. This merqer may
have been a reaction, in part, to the weakened position
Underwccd found itself in after many of the above mentioned
■erqers had taken place.

It was not until after World War II that the electric
ear initiated a drastic chanqe in the accepted pattern of
industry structure. Prior to World War II — 1936-1940 —
the profit rate in the industry averaqed 15.7 percent.
This was due to the stronq position of the traditional
typewriter companies in the market, combined with the

259

increased demand for typewriters in the business world.
This was the peak of the manual era. Immediately after
Borld Bar II the typewriter firms were able to recapture
their position in the domestic and international sales of
■anual typewriters. The profit rate cn equity averaqed 18
percent durinq the 1947-1951 time period.However with the
start of a new decade the profit picture in the industry
rapidly deteriorated.

It the end of World War II, IBB had a significant
head start on the traditional typewriter manufacturers in
the development of the electric typewriter. With the impact
of foreiqn competition and the declininq share of the
■anual aarket there beqan a new shift in the industry
structure. The four traditional manufacturers were
fiqhtinq for survival. IBB had the dominant position in
the industry and a dominany position in the future. The
industry had been transformed from an oligopoly to a
partial nonopoly with IBB as the leader. Thus, a final
■erqer pattern occurred — a wide effort for
diversification into areas to provide strength in their
typewriter lines was made by the traditional aanufacturers.

In 1954, Royal merged with HcEee hoping belatedly to
brcaden a sales and distribution base by enterinq the
office equipment field. But with the impact of the
electric boqinninq to be felt the profitability of the fira
continued to decline, littcn's merger with Royal in 1965

260

Has really an attempt to rescue a flcunderinq firs.

The 1955 merqer of Reainqton-Band and Sperry
Corporation was very troad in scope. Its sain purpose was
to combine Remington-Rands stronq manufacturing
capabilities with the advanced technoloqy of Sperry. The
actual typewriter aspect of the aerqer was relatively
■incr.

Saith-Corona was in serious financial trouble when it

aerqed in 1956 with Kleinschaidt Labs and then in 1958 with

Earchant to fora SCB. These aerqers provided a stronq
«

research capability (from Kleinschaidt) and rounded out the
office equipment product line (from Harchant).
Saith-Corona realized that from a merchandising standpoint,
it was difficult to support a distribution organization
with lust typewriters.

By the time Olivetti aerqed with Underwood the latter
was in serious financial difficulties. The purpose of the
aerqer was to qive Olivetti an opportunity to utilize an
already established domestic marketing and service
organization.

So this last merqer movement which in qeneral terms
had as its motive the broadcninq of technological
capabilities and the roundinq out of aanaqerial
capabilities applied to some extent to the typewriter
industry, but in a defensive way. The typewriter industr'
simply would not have survived without the acquisition

261

that toot place during the 1950’s and early 1960*s. As it
•as, the traditional typewriter industry in terns of
independent companies has virtually disappeared.

The activity of IBH is a special case. IBB acquired
Electromatic Typewriters in 1933. This acquisition was not
for the purpose of enterinq the typewriter industry but
rather to aid in developinq IEH's keypunch machines. It
was only throuqh strong urqinq by sose hiqh engineers in
Electromatic Typewriters that kept IBB in the typewriter
business. Then seeing the potential of the typewriter for

their data processing systems, IBB seized cn the market
potential for the electric typewriter during Bcrld War II.
This aave IEB the chance to achieve product acceptance for
the electric typewriter and the time tc work out all of the
technical difficulties — thus providing them with a 5 to 8
year lead over all the other typewriter companies.

Berqers have played no really important role in the
typewriter industry in accounting for the present aarket
structure. A possible exception miqht be IBB’s acquisition
of Electromatic in 1933. At that time, the motive was not
to become a stronq contender in the typewriter industry.

In the typewriter industry, merqers appear to be an
alternative to a firm simply qoing into bankruptcy, vith
its assets beinq diffused throughout the industry
generally. The firm acquired is typically not of much
value tc the acquiring firm, but it is worth more to an

262

existinq fits than would be on the auction block. This is
the «ain economic reason for these nerqers.

Given IEB’s dominant position the last series of
merqers nay be viewed as an attempt tc compensate for the 5
to 10 year lead that IEM has in the development of the
electric typewriter. Certainly the motives are not for
market control, qiven IBM’s very stronq position. The
motive for these nerqers is simply to survive in the face
of IEM’s overwhelminq dominance.

Prom the analysis of the oerqer patterns of the major

typewriter producers the study turns to an analysis of the
educational market for typewriters. Today no one company
has a dominant position in the sale of electric to school
districts. It is apparent that this is a market with qrcat
potential. Kith the increasinq numbers of school children
and the switch over from manual to electrics, the need for
electrics will be quite qreat in future years. Hhen the
los Anqeles School System was examined it was found that
only four classrooms were equipped with electrics (1.36
percent). Of these, Olivetti-Underwood has 50 percent of
the market. One reason for this is the fact that
Clivetti-0nderwcod has been able to under bid other
competitors. In the future, firms that want to enter this
field must be able to compete upon a price basis, for many
schcol systems use low price as a major criterion for
buyinq from one or another company.

2*3

In reviewing the short tern future prospects for the
typewriter industry it was found that each firm has a ma"jor
hurdle to overcome before the dominance of I BH is
sustained or even reduced.

In the case of Clivetti-Underwood many of the
problems are solved. They nanufacture a good electric
machine. The one reuaining problem is to regain their lost
product acceptance. Remington also has a gcod machine.
But without a stronq marketing and distribution system it
cannot effectively compete against IEK.

The problems at SCB are more serious. They possess a
qood portable electric and are undoubtedly qoing to make
continued market qains in this area. However, they have
had serious problems with their office electric and have
lest their position as a malor market contender by
dismantling their marketing and distribution system.

Royal's position is even more bleak. Hhile its
market share in the office electric typewriter field is at
present 10 percent, it is constantly being eroded. Royal
has not developed an office electric typewriter technically
competitive to IB K. Nor does the direct sales and service
organization beqin to match that cf IB H. As IBH's
doninance continues to be felt, the effect cr Royal could
he a further weakening of its market position.

When the electronic era arrives, technological
ability and a good marketing and distribution system will

264

be the key requirements for success. If the traditional
typewriter manufacturers do not develop these features, the
industry composition as we know it today may be drastically
altered. IBM may bold 100 percent cf the industry, or
other firms, such as ECU or Xerox, nay be the industry
leaders.

Is mentioned in the introduction the primary purpose

of this study was three-fold: (1) to update the picture of

the typewriter industry to include both pre-electric and

electric phases cf development, (2) to test the
«

relaticnships between seller concentration and excess
Frcfit makinq in the electric typewriter field, and (3) to
explore the problem of seller concentration and the
possible existence of barriers to entry in the electric
typewriter industry.

With the above examination of the pre-electric, the
electric and the future electronic eras, not cnly has the
picture of the typewriter industry been updated but, in
addition, a consolidated picture of the industry has been
presented in one study.

265

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"Olympian Heights". Fortune, Vol. 58 (September 1958) p. 82.

"Etching the Right Typewriter for the Job—Electric or Manual".
Management Review, Vol. 46 (April 1957) p. 35-

"Portable Gets Electric Touch". Business Y’eek (October 13, 1956)

p. 74.

"Portable Typewriters". Consumer Report (November i960).

"Portable Typewriters". Consumer Report (November 1966).

"Ihess a Button for a Cliche. IBM Electric Typewriting Hirose-
vriting". Business Vfcek (October 29, 1955) p- 84.

"Putting the Directors to Work - SCM". Business Week (November 1,

"Rand Develops Hew Super Typewriter". Marine Engineer, Vol. 58
(February 1953) p- 113.

270

"Eemingtan to Resume Portable typewriter Drive via Sullivan,
Stauffer, Colwell t Bayler". Advertising Age, Vol. 34
(September 9 , 1963 ) p. 1.

"Remington Portable Carroaign Succeeds in Changing Foreign Buying
Habit”. Printers ink, Vol. 260 (September 20, 1957)*

"Remington Rand buys Comnuter Corporation". Business Week (March
4, 1950) p. 20.

"Royal McBee Ifeets Import Challenge". Factory, Vol. 119 (March
1961 ) pp. 90-93.

"Royal in $4 million Drive for Office Machines”. Advertising Age,
Vol. 31 (March 21, i 960 ) p. 121.

, "Royal Plugs into IBM's Ihrket." Sales Management, Vol. 90
(February 15, 19°3) PP- 37-41.

The Royal Standard, Vol. 8, Ho. 2 (February 1923).

"SCM". Forbes, Vol. 100, Ho.10 (November 15, 1967 ) p. 23 .

"SCM". Commercial and Financial Chronicle (April 27, 1961).

"SCM Corporation". Commercial and Financial Chronicle, Vol. 196
(December 6, 1962) p. 2337*

"SCMVnkes Up". Sales Management, Vol. 90 (April 19, 1963) PP.

44 - 1 * 5 . *

"Shifts May Improve Typewriter Results". Financial World (January
11 , 1961) p. 13.

Sine, John, "typewriters*. Administrative Management (May 1961 )

p. 73.

"Singer Aims to Sew Up Share of Market for Portable typewriters."
Advertising Age, Vol. 33 (September 3, 1962) p. 12.

"60 Electric - It's in the typewriter Dialer's Future." Office
Appliances, Vol. 107 (January 1958) p. 24.

"Special Abilities of Today's typewriters". Administrative Manage¬
ment, Vol. 26 (June 1965 ) pp. 64-63.

"Sperry Rand - Marc of Over-ell Operating". Fortune, Vol. 6 l
(March i 960 ) pp. 125 ♦.

271

Standard Educational Almanac,

1968 ) p. 152 .

(Los Angeles: Academic Media, Inc.,

“Switching to a Black Ribbon - Underwood Boosts Sales Since Olivetti
Took Over". Business Veek (October 24, 1964) p. 178 .

“Through History with Standards: Second Series". Magazine of
Standards, Vol. 27 (March 1956) p. 77-

“2 + 2 of Sperry Rand". Fortune, Vol. 52 (August 1955) PP* 88-91.

"Typewriter Click—Electric Models Have Becone Key to Industry
Recovery". Barron's, Vol. 4l (October lo, l96l) p. 11.

“Typewriter Makes Shifts Key: SCM". Business Veek (torch 27, 1956)

p. 172.

'"Typewriter Tariff Argued in Washington Eearings". (Application of
SCM and Royal) Office Appliances, Vol. Ill (May i 960 ) p. 8 .

“Typewriters For Hone Use". Consumer Bulletin (toy 1968 ).

"Typists lriend" (IBM Adm. Terminal System). Fortune, Vol. 71
(February 1965) p. 204.

"Uhderwpod and Olivetti, Fusion Makes Available Complete Line for
Agents, Dealers". Office Appliances, Vol. 112 (August i 960 )

pp. 6-7.

“Underwood Fights Its Way Back". Business Veek (December 30, 196l)

pp. 42-44.

"Unique Transfer-matic Mu chines Aluminum Frames for IBM's Hew
Typewriter". Brochure published by Crocs Co .

“U.S. Business tochine Exports-Imports Rise". International
Commerce, Vol. 70 (January 27 , 1964) p. 31.

Vough, C. F. "Competition and Rising Production Costs". Production
(dccember 1961 ) pp. 6l-64.

"What Vent Wrong at Underwood". Fortune, Vol. 62 (September i 960 )

p. l4l.

United States Xmorts by Product, by Co-.ntry, for January through
June, 1968 (new fori:: Business^ .equipment Manufacturers
Association, September 12, 1968 ).

272

"Why typewriter Makers Want You to Sell Iheir Portables".

Electrical Merchandising Week, Vol. 96 (August 10, 1964)

"Wrong Keys — Royal”. Forbes, Vol. 86 (ifovehber 15, i960) pp.

22-23.

HBXJC DOCUEHTS

Los Angeles Board of Education, Division of Secondary Education
and Ffeasurement and Evaluation. Reports of Subjects and .
Enrollments - Junior and Senior High School for Spring
Semester 1906 . 1568.

TJ.S. Department Commerce, Bureau of the Census. Annual Survey
of Manufacturers, 1966 (Value of Shipments, Concentration
* Ratios by Industry. 1967.

_. Concentration Ratios in Manufacturing Industries . 1958.

A report prepared for the Senate Subcommittee on Antitrust
and Monopoly of the Committee on the Judiciary. 1962, 1963,
1964.

_. Current Industrial Reports, typewriters, July 1968 .

(Series H35C (60)-7) September 9, 19o3.

. Facts for Industry . (Series K35C) 1943-1967.

_. Statist ical Abstr act of The limited States. 89th Edition.

1968:

_. Phited States Reports (Series FT-410). 1948-1967.

_. United States Imports (Series FT-135) 1943-1967.

U.S. Department of Commerce, Business and Defense Services
Administration, industry Profiles, 1958-1965 . 1966.

_. United States Typewriter Industry, Analysis end Trends

1958-1966 . July 19o7.

_. World Trade in Typewriters, ipltB-1958 . June 1959.

U.S. Department of Health, Education, Welfare, Office of Education.
Education Directory 1967-68. Fart 2, Public School System,

—gjj- ‘ -

273

Halted States Tariff Comission. iyp g w~ii e ^s- Application for
Escape-Clause Investigation Under Section 7 of the Trade
Agreements Extension Act of 1951, as Amended. Brief on
behalf of Snith-Corona-Msrchant, Inc., and Royal-McBee
Corporation. November 1959 .

U.S. Federal Trade Commission. Business 1-fa chine and Typewriter
Ifenufaeturlng Companies. 19 S 1 T

REPCRTS

Craffey J. J., ed. IBM Selectric . Special Report to ET Employees .
(Hew York: IBM Corporation, July 31 , 1963.). *

International Business Machines Corporation. Annual Reports.

‘ 1960 - 1967 .

Olivetti-Underwood Corporation. Annual Reports . 1959 - 1962 .

Royal McBee Corporation. Annual Reports . 1960 - 1965 .

SCM Corporation. Annual Reports . I 96 O-I 967 .

Sperry Rand Corporation. Amrial Reports . 1960 - 1967 .

Litton Industries. Annual Reports. 1965 - 1967 -
Consumer Bulletin (Annual 1968 ) p. 52.

OTHER SOURCES

Los Angeles Board of Education. Telephone Interview with the head
of the Business Education Department. July l 6 , 1969 .

Royal Typewriter, Division of Litton Industries. Letters received
from Vayne Boulton, Product Analyst. July 29 , 1969 .

Weston, J. Fred. Testimony submitted before the Federal Trade
Commission in the merger application of Litton Industries
and Triumph-Adler. April 10, 1569 .

APPENDIX

*?5

9 Lz

DATA TABLE III-l

' PATTEHK OT TYPEWRITER SALES IN THE UNITED STATES, 1948-1967 • •
(Figures in Mi. 1 Ilona of Dollars at Estimated Retail List Prices)

Tear

Ended

12/31

Industry

Total

Sales

Port¬

able

Sales

f of Total
Total Off.
Sales Sales

* of

Total

Sales

Office

Manual

Sales

i of off.
Total Elec.
Off. Sales
Sales

% of
Total
Off.
Sales

Special¬

ized

typevr.

Sales

*of

Total

Sales

1957

546 (0 )

133

24.4

358

65.6

23.4

274

76.5

10 . 0 (b)

1966

564

126

22.3

368

65.2

101

27.4

267

72.6

12.4

1965

430

23.0

295

68.6

28.8

210

71.2

8.4

1964

394

24.9

265

67.1

31.3

182

68.7

8 .0(b)

1963

352

25.6

236

67.0

32.2

160

67.8

7.4(b)

1962

352

25.0

240

68.2

31.7

164

68.3

. 24

6 .8(b)

1961

304

27.6

201

66.1

36.8

127

63.2

6.2

i 960

279

25.1

189

68.1

38.6

116

61.4

6.8

1959

278

28.4

181

65.1

39.2

60.8

6.1

1959

252

32.1

160

63.5

44.4

55.6

4.4

1957

289

106

36.7

172

59-5

48.3

51.7

3.8

LLZ

DATA TABLE III-l (continued)

Tear

Ended

12/31

Industry

Total

Sales

Port¬

able

Sales

f of Total
Total Off.
Sales Sales

* of

Total

Sales

Office

Manual

Soles

i> of
Total
Off.
Sales

Off.

Elec.

Sales

iot

Total

Off.

Sales

Special/.

Izvd

typewr.

Sales

*of

Total

Sales

1956

256

30.1

170

66.4

49.4

50.6

3.5

1955

202

29.2

136

67*3

55.1

44.9

3.5

1954 (a)

1953 (»)

1952

166

*♦5

27*1

117

70.5

71.8

'29.1

2.4

1951

166

24*6

121

72.9

74.4

25.6

2.4

1950

144

29.2

68.8

76.8

23.2

1.9 0>)

19^9

100

32.9

65.9

78.8

21.2

1.2 (b)

1948

111

28.8

70.2

85.9

14.1

1.0 (b)

(a) Data not collected In these years*

(b) Estimated by summing components end substraeting from 100 percent

Source: Facts for Industry Series M35C, 1948-196?, Bureau of the Census, U.S. Dept of Coamerce.

DATA TABLE III-2

COST AND PRODUCTION CHARACTERISTICS OF TYPEWRITERS
1958-1965

SIC 3572 Typewriters

Total Eaploynent Production* Workers

Tear

Number Payroll

($ 1 , 000 )

Number

Man Hours
(1,000)

Wages

($1,000)

1958

19,779 84,467

16,310

29,748

64,612

1959

19,692 93,593

16,125

31,320

71,586

I 960

19,102 92,965

15,266

29,665

68,064

1961

18,540 93,788

14,848

28,677

68,096

1962

17,798 96,697

14,049

27,549

69,308

1963

18,023 102,885

13,940

27,076

71,068

1964

17,683 108,835

13,401

26,230

71,350

1965

18,593 116,621

13,992

27,328

74,246

Tear

Value Added * Value Shipments * Capital Expenditures *

1958

168,877

238,173

9,880

1959

188,658

265,358

7,395

I 960

201,186

282,971

10,307

1961

195,834

270,535

8,309

1962

206,883

290,685

10,073

1963

243,190

315,385

9,576

1964

288,151

379,437

9,083

1965

298,018

395,599

12,480

* Amounts In $1,000

2?8

DATA TABLE III-2 (continued)

Tear

Value

Added as
Percent of
Shipments

Payroll

per

Employee

Wages

per

Production

Worker

Value of
Shipments
per Produc¬
tion '..'errker

Value

Added per

Production

Worker

1958

70.9

$4,271

$3,961

$14,603

$10,354

1959

71.1

4,753

4,439

16,456

11,700

i 960

71.1

4,867

4,459

18,536

13,179

1961

72.4

5,059

4,586

18,220

13,189

1962

71.2

% 433

4,933

20,691

14,726

1963

77*1

5,709

5,098

22,624

17,445

1964

75.9

6,155

5,324

28,314

21,502

1965

75.3

6,272

5,306

28,273

21,299

Value
Added per
Dollar of
Wages

Wages per
Production
Worker
Man-hour

Annual Man¬
hours per
Production
Worker

1958

$2.6l4

$ 2,172

1,824

1959

2,635

2.286

1,942

i 960

2.956

2.294

1,943

1961

2.876

2.375

1,931

1962

2.985

2.516

1,961

1963

3.422

2.625

1,942

1964

4.039

2.720

1,957

1965

4.014

2.717

1,953

Source: Industry Profiles,

1958-1965 (Washington: U.S.

Government

Printing Office, B.D.Sjt. 1966 ) p. 105 .

279

280

DATA TABLE III-3

SHAKE OP PRODUCTION DATA FOR INDUSTRIES IN SIC 357 CATEGORIC
($ in millions)

Computing Scales Office

& Related Percent Type- and Machines Percent

Total Machines of writers Percent Balances Percent Ncc. of

Tear ghj-rocnts SIC 3571 • Total SIC 357? of Total • SIC 3576 • of Total • SIC 3579 Total

1965

4,310

3,400

78.9

396

1964

3,359

3,011

78.0

379

1963

2,732

2,020

72.6

315

1962 (a)

2,202

1,833

83.2

291

1961

2,373

1,677

70.7

270

i 960

2,230

1,556

69.8

283

1959

1,941

1,302

67.1

265

1953

1,684

1,104

65.6

238

9.2

115

2.7

399

9.2

9.8

101

2.6

368

9.5

11.3

3.5

349

12.5

13.2

3.5

11.4

3.2

351

14.7

12.7

3.1

321

14.4

13.6

4.2

293

15 .I

14.1

4.6

264

15.7

(a) Total Shipmenta without Office Machines Nec.

Source: Industry Profiles, 1953-1965 (Washington, D.C.. U.S. Government Department of Commerce,
Business and Defense Services Administration, 1966) p. 105*

DATA TABLE V-l

0.S. PROPORTION OF TYPEWRITER IMPORTS
TO EXPORTS
191 * 8-1957

(figures In percents)

U.S. Percentage of Inports to Exports

Tear

Total less Parts

Parts

Total

1967

349

164

1966

296

176

1965

254

154

1964

219

137

1963

228

l4l

1962

399

125

1961

267

146

I 960

287

147

1959

283

138

1958

257

136

1957

130

1956

1955

1954

1953

1952

1951

1950

1949

1948

Source: These data were developed from the two foreign trade series
published by the U.S. Department of Commerce. FT 135 Is for
U.S. Imports. FT 140 Is for U.S. exports. (Washington DX.:
U.S. Department of Commerce, Bureau of the Census) monthly
publications 191*8 through December 1967 .

281

DATA TABLE VII-1

REMINGTON RAND k SUCCESSOR COMPANIES
Dollar Amounts In (OOO)

Net Net

Income Income to

Tear

Sale3

Ibtal

Assets

Net

Income

Net

Worth

Net Worth

Average Net
Worth

1925

N.A.

31,230

2,534

28,730

8.82

N.A.

51,690

4,558

13,366

34.10

21.66

N.A.

74,163

5,967

40,630

14.69

22.10

59,618

73,128

2,851

41,056

6.94

6.98

63,292

72,211

2,928

43,254

6.77

6.94

1930

64,l8l

72,889

6,o4l

42,766

14.13

14.04

47,399

66,429

1,411

39,364

3.58

3.44

32'

32,247

61,003

(3,036)

28,637

(IO.60)

(8.93)

22,484

45,509

(7,581)

22,453

(U.50)

(10.10)

27,913

47,310

1,265

24,719

5-12

5.36

33,389

48,710

1,751

26,400

6.63

6.85

39,358

44,166

3,010

18,571

16.21

13.39

45,633

44,264

3,517

17,565

20.02

19.46

51,104

44,663

4,510

19,112

26.60

24.59

43,405

43,240

1,750

18,770

9-33

9-24

19^0

44,031

43,660

2,305

18,758

12.29

12.28

49,174

47,435

4,263

20,708

20.59

21.55

77,283

63,101

6,195

24,585

25.20

27.36

91,600

78,433

4,319

27,745

15.56

16.51

132,861

79,504

4,343

29,360

14.78

15.21

132,536

75,419

5,306

23,674

22.41

20.01

107,985

74,569

6,541

29,095

22.48

24.79

147,136

110,455

15,728

42, 211

37.26

44.11

162,439

127,981

15,129

42,924

28.59

35.54

148,175

126,081

10,112

58,177

17.38

20.00

1950

135,948

130,846

8,066

61,997

13.01

13.42

187,486

159,476

14,037

71,025

19.46

19.63

227,425

201,435

15,140

81,927

18.48

19.80

282

DATA TABLE VII-1 (continued)

Tear

Sales

Total

Assets

Net

Income

Set

worth

Net Net

Income Income to

to Average Net

Net Worth Worth

1953

235,502

205,701

14,151

92,362

15.32

16.24

225,494

207,712

12,211

99,078

12.32

12.76

258,389

269,739

16,127

114,892

14.04

15.07

710,696

557,493

46,349

254,473

18.21

25.10

871,047

708,536

49,612

33=,848

14.73

14.35

864,330

743,153

27,481

341,246

8.05

8.10

989,602

778,475

27,644

345,807

7.99

8.05

,1960 1,173,050

849,215

37,236

3=0,057

10.34

10.55

61 1,176,999

895,217

27,816

370,789

7.50

7.61

62 1,182,55^

873,006

24,373

345,091

7.06

6.81

63 1,227,086

901,160

13,834

348,724

3.86

3.99

64 1,278,569

888,740

26,659

336,644

6.90

7-25

65 1,247,621

915,417

22,017

383,609

5.74

5-72

66 1,279,769

948,698

31,859

415,633

7.67

7.97

67 1,487,120 ]

1,032,846

53,902

474,757

11.35

12.11

(N.A.) data not i

available

Summary -

• Grovth Rates

(in Per Cent)

Sum Net

Income

Total

Sum Net

Tears Sales As:

lets Income

Worth Worth

Notes

1927-39 (2.8)* (4.4)

(9-7)

(6.2) 7.67

*1928-39

1940-55 12.5 12.9

13.9

12.8 18.36

1956-67 6.9 5.8

1.4

5.8 8.68

1927-55 5-6 4.9

3.8

3-9 15.01

1927-67 8.6 6.8

5.7

6.3 10.24

Sperry Corporation

1939-54 21.0 16.2

11.6

14.5 19-66

1932-54 22.0** 17.7

29.0

14.1 23.28

**1937-54

283

DATA TABLE VII-2

L. C. SMITH CORONA
Dollar Amounts In (OOO)

Net Net

Income Income to

Tear

Sales

Tbtal

Assets

Net

Income

Net

Worth

Net Worth

Average Net
Worth

1925

N.A.

—

N.A.

—

N.A.

11,757

772

9,634

8.01

—

N.A.

13,552

756

11,102

6.81

7.29

. 29

N.A.

13,758

1,169

10,905

10.72

10.62

1930

N.A.

13,066

10,006

•39

.37

N.A.

11,366

(927)

8,944

(10.36)

(9.76)

N.A.

9,928

(1,031)

8,010

(12.87)

(12.16)

N.A.

9,786

(292)

7,792

(3.75)

(3-70)

N.A.

9,928

235

7,874

2.98

3.00

8,306

10,575

428

7,942

5-39

5.41

10,336

8,477

709

5,772

12.28

10.42

13,089

10,051

1,096

6,657

16.46

17.63

11,498

10,058

473

5,733

7.08

7.67

11,^39

9,876

345

5,786

5-11

5*99

1940

10,790

9,961

326

5,799

5.62

5.63

14,513

11,471

1,035

7,431

13.93

15.77

18,452

13,224

1,327

8,057

16.47

17.14

17,269

13,913

1,065

8,492

12.54

12.87

18,901

13,233

717

8,578

8.36

8.40

14,207

12,329

642

8,581

7.48

14,085

12,455

868

8,804

9-86

9-99

21,169

16,188

1,796

9,955

18.04

19.15

25,444

18,581

1,737

10,847

16.01

16.70

22,524

18,331

559

10,922

5-12

5-14

1950

24,907

20,787

1,626

12,307

13.21

14.00

30,995

22,280

1,806

13,467

13.41

14.01

29,851

24,621

1,193

14,016

8.51

8.65

284

DATA TABLE VII-2 (continued)

L. C. SMITH CORONA
Dollar Amounts in (000)

Tear

Sales

Total Net

Assets Incone

Net Net

Income Income to

Net to Average Net

Worth Net Worth Worth

1953

31,285

24,624

1,014

14,385

7.05

7.14

29,053

24,987

356

14,434

2.47

30,988

26,837

1,052

15,295

6.88

7.08

35,947

29,759

1,456

16,507

8.82

8.53

56,820

44,315

2,154

20,202

10.66

11.74

87,145

76,676

2,244

34,567

7.12

8.19

90,411

80,329

551

37,728

1.46

1.52

i960

93,358

85,203

(2,193)

35,504

(6.18)

(5-99)

96,476

86,345

(1,843)

33,841

(5.45)

(5.31)

103,165

88,383

2,592

35,814

7.24

7.44

117,343

88,430

1,113

48,043

2.32

2.65

124,704

91,728

2,437

49,884

4.89

4.98

149,657

96,931

3,815

52,948

7.22

7.42

240,560

146,270

10,658

78,522

13-57

16.21

705,160

451,402

25,205

177,401

14.21

19-70

(N.A.)

data not available

Summary-Growth Rates

•

(in Per Cent)

Sun Net

Income

Total Net Net

Sum Net

Tears Sales A'

isets Income Worth

Worth

Notes

1927-39 N.A. (1.6) (7.1) (4.5)

5.50

19*»0-51 10.1

7.6 16.8 8.0

11.93

1952-56 *.8

4.9 5.1 4.2

6.T9

1957-67 29.0 26.0 28.0 2k.0

7.73

1927-56 7.2*

3-3 2.2 1.9

8.30

*1935-56

1927-67 11,9*

9.5 9.1 7.6

7.92

*1935-56

285

DATA TABLE VII-3
UNDEHWOOD

Dollar Amounts in (000)

Bet

Income

Tear

Sales

Total

Assets

Net

Income

Net

Worth

Net Worth

1925

B.A.

30,211

2,889

26,329

10.97

N.A.

31,440

2,105

26,481

7.95

N.A.

42,792

3,974

35,997

11.04

N.A.

38,157

4,643

35,921

12.93

N.A.

38,855

7,363

36,328

20.27

1930

N.A.

37,362

4,012

35,310

11.36

N.A.

33,502

1,401

32,416

4.32

N.A.

31,357

(762)

30,658

(2.49)

14,648

21,609

1,518

20,586

7-37

20,716

23,568

2,605

22,134

11.77

23,975

25,430

3,096

23,666

13.08

36'

27,312

28,216

3,839

25,839

14.86

30,767

30,053

4,913

26,954

18.23

20,037

29,405

1,768

26,183

6.75

20,944

26,121

1,857

22,963

8.09

1940

23,020

25,767

2,226

21,944

9-23

32,659

29,790

3,740

22, 372

16.72

28,564

34,652

2,234

24,343

9.18

42,151

38,293

2,483

25,298

9.82

32,305

34,713

2,256

23,802

9.63

23,510

29,564

2,233

23,826

9-37

31,456

31,629

1,955

23,945

8.16

49,813

38,332

6,103

28,089

21.73

49,017

41,637

6,013

31,265

19.29

36,670

39,956

3,862

32,456

U .90

1950

50,855

45,074

4,927

34,446

14.30

66,559

56,620

4,970

36,479

13.63

57,363

56,292

3,730

36,816

10.13

266

Bet

Income to
Average Net
Worth

7.97

12.72
12.91
20.38
11.20

4.14

(2.42)

5.92

12.20

13.52

12.90

18.61

6.65

7.56
9.91

16.88

9.56

10.00

9.19

9.38

8.18

23.46

20.26

12.12

14.73
14.01
10.16

DATA TABLE VII-3 (continued)

ONDHWDOD

Dollar Amounts in (000)

Bet

Income

Income to

Total

Net Net

Average Net

Tear

Sales

Assets

Income Worth

Net Worth

Worth

1953

65,898

55,906

845 36,796

2.30

63,367

55,032

1,238 39,634

3.12

3.24

69,272

55,631

1,501 39,459

3.80

3-80

5©

70,581

59,142

(8,138) 30,490

(26.69)

(23.27)

67,504

57,024

(1,613) 28,861

(5-59)

(5.44)

57,075

63,390

(7,U7) 27,459

(25.91)

(25.27)

60,494

56,890

(14,093) 13,150

(77.65)

( 61 . 26 )

i 960

79,081

72,761

(26,033) 16,156

(l6l.l4)

(151.59)

82,255

88,827

( 8 , 926 ) 8,053

(110.84)

(73-74)

99,778

95,790

( 8 , 052 ) 47

(a)

( 198 . 81 )

(N.A.)

data not

available

(a)

not calculated

Summary- Growth Rates

(in Per Cent)

Sum Net

Income

total

Net Net

Sum Net

Tears

Sales

Assets

Income Worth

Worth

Notes

1927-39 6 . 2 *

(7.9)

(11-9) ( 8 . 0 )

10.73

*1933-39

1940-55 7.6

5.3

( 2 . 6 ) 4.0

10.46

1956-62 6.0

8.4

( 0 . 2 ) ( 65 .O)

(57.25)

1927-55 7.3*

0.9

(3-5) 0.3

10.58

*1933-55

1927-62 6 . 8 *

2 ‘ 3 tow (100) < 17 - 2)

1.68

*1933-62

287

DATA TABLE VI1-4

ROYAL & SUCCESSOR COMPANIES
Dollar Amounts in (OOO)

Total Net

Year

Sales

Assets

Income

1925

N.A.

12,357

1,020

* 26

N.A.

12,821

1,118

N.A.

13,403

1,130

N.A.

14,043

425

N.A.

15,088

562

1930

N.A.

15,012

333

N.A.

14,037

(42)

N.A.

13,414

(424)

N.A.

13,866

145

N.A.

14,963

942

N.A.

10,512

1,677

16,666

10,818

2,628

N.A.

11,224

1,573

15,712

10,940

1,526

18,173

11,716

1,654

1940

18,782

12,637

2,388

24,376

15,216

2,733

22,224

14,978

2.475

13,304

14,559

326

18,759

15,310

1,657

22,556

16,743

1,468

19,242

15,723

590

35,620

20,922

4,013

49,708

25,260

5,620

*►9

42,554

25,154

3,693

1950

43,472

27,349

3,909

60,368

33,295

4,438

58,204

32,675

3,109

Net

Worth

lfet

Income

Net Worth

Net

Income to
Average Net
Worth

10,6l8

9.61

—

11,136

10.04

10.28

11,480

9.84

9-99

11,912

3.57

3.63

12,451

4.51

4.61

12,726

2.62

2.64

12,610

(-33)

(.33)

12,021

(3.35)

(3-44)

12,085

1.20

12,395

7.60

7.69

8,819

19.02

15.81

9,165

28.67

29.22

9,657

15.92

16.71

10,101

15.01

15.45

10,665

15.51

15.93

11,219

21.29

21.82

12,207

22.39

11.67

13,360

18.53

19.36

13,195

2.47

2.45

13,407

7.88

7.95

14,182

10.35

10.64

13,864

4.26

4.21

15,116

26.55

27.69

18,577

30.25

33.36

20,089

18.38

18.79

22,001

17.77

18.57

23,797

18.65

19-38

24,535

12.67

12.86

28 B

DATA TABLE VII-4 (continued)

ROYAL & SUCCESSOR COMPANIES
Dollar Asounts in (OOO)

Tear

Sales

Total Net

Assets Income

Net

Worth

Set

Income

Net Worth

Net

Income to
Average Net
Worth

1953

68,986

33,563

2,776

25,151

11.04

11.17

84,398

46,984

2,791

31,868

8.76

9.79

84,694

53,051

3,633

33,545

10.83

11.11

95,876

63,097

5,665

41,413

13.68

15.12

107,648

67,792

4,456

43,381

10.27

10.51

94,872

68,817

387

41,878

0.92

0.91

103,951

85,599

1,285

43,274

2.97

3.02

i960

111,073

84,743

771

43,710

1.76

1.77

106,846

82,823 (1,080)

1 43,199

(2.50)

(2.49)

106,335

69,145

1,781

37,703

4.72

4.40

109,231

64,705

1,427

38,445

3.71

3.75

113,650

70,081

1,898

39,843

4.76

4.85

(N.A.) data not available

Summary-

Grovth Rates

(in Per Cent)

Tears

Sales

Total

Assets

Net

Income

Net

Worth

Sum Net
Income
to

Sum Net

Worth

1927-39 2-9

(1.1)

3.2

(0.6)

8.30

1940-54 11.3

9-8

1.1

7-7

15.18

1955-64 3.3

3.1

(7.0)

1.9

7.28

1927-54 9-4

4.8

3.4

3.9

12.78

1927-64 8.5

4.6

1.4

3.4

8.94

289

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